Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

SHOREHAM HARBOUR BILL

Lords Amendments considered and agreed to.

LONDON COUNTY COUNCIL (GENERAL POWERS) BILL

Read the Third time and passed.

REGENT REFINING COMPANY BILL

Queen's Consent, on behalf of the Crown, signified.

Bill read the Third time and passed.

CITY OF LONDON (VARIOUS POWERS) BILL

Read the Third time and passed.

GRIMSBY CORPORATION BILL [Lords]

RIVER DART NAVIGATION BILL

As amended, considered; to be read the Third time.

RUNCORN DISTRICT WATER BOARD BILL [Lords]

Read a Second time and committed.

PIER AND HARBOUR PROVISIONAL ORDER (LANGSTONE HARBOUR) BILL

As amended, considered; to be read the Third time Tomorrow.

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

North Sea Fishing Grounds

Mr. Hector Hughes: asked the Minister of Agriculture, Fisheries and Food if he is aware of the diminution in certain species of useful and edible fish in the customary North Sea fishing grounds; and if he will set up a commission of inquiry into the cause of this, with a view to restoring the productivity of these fishing grounds.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. W. M. F. Vane): Haddock and herring are the only species of commercial importance which have diminished in the North Sea in recent years. We shall continue to support the efforts made to deal with these problems internationally through the International Council for the Exploration of the Sea and the Permanent Commission set up under the 1946 Convention, and I see no advantage in setting up a commission of inquiry.

Mr. Hughes: Is the hon. Gentleman not aware that the causes of this diminution go much deeper than is indicated in his answer? Does he not agree that the diminution is due largely to the policy of the present Government in giving undue encouragement to foreign fishing fleets in competition with British fishing fleets? Will the hon.


Gentleman have the matter further investigated with a view to getting at the root causes and seeing that justice is done to British and particularly Scottish fishing fleets?

Mr. Vane: My original answer did not go into the causes, which are a combination of natural causes and over-fishing. The hon. and learned Gentleman will be pleased to hear that, as a result of proposals made by the United Kingdom, the Permanent Commission agreed at its recent meeting on measures to be introduced next year for the closer regulation of the use of small-mesh nets, which is one of the things the hon. and learned Gentleman has in mind.

Fishing Trawlers (Overseas Orders)

Mr. Hector Hughes: asked the Minister of Agriculture, Fisheries and Food if he will give a list of the types of fishing trawler contracts which have hitherto gone to Scottish shipbuilding firms but which this year have gone to European and South American shipbuilding firms.

The Minister of Agriculture, Fisheries and Food (Mr. Christopher Soames): None, Sir.

Mr. Hughes: Is the right hon. Gentleman not aware that owners and workers in British shipyards, and particularly in north-east Scottish shipyards, are complaining of the lack of orders and of work, which is due largely to the encouragement given by the present Government to foreign shipyards, particularly by giving grants and loans to foreign shipyards, and thereby depriving British shipyards and British workers of work to which they are entitled? Will the right hon. Gentleman take steps to change that policy and see that justice is done to British and particularly Scottish shipyards?

Mr. Soames: What the hon. and learned Gentleman says cannot be so, for until schemes are laid before Parliament there will not be any grants and loans given for building fishing ships abroad. The schemes will be laid before Parliament and will be debated then.

Mr. Peart: Is the Minister not aware that the future policy of the Government

is to encourage building in foreign yards? Is there not a danger that this may have harmful effects on our home shipping industry? Will he consult his colleagues in the Cabinet and have the policy reversed?

Mr. Soames: There is no question of encouraging owners to get ships built abroad, as the hon. Gentleman well knows. When the schemes are laid it will be seen that it will be possible for owners in this country to get boats built either at home or abroad and still be able to get the grants and loans, but there will be many provisos in the arrangements which are made which will ensure that there is fair competition from the point of view of our yards.

Mr. Peart: Apart from the verbiage, cannot the right hon. Gentleman make it clear to everybody that it is the Government's policy to encourage ship-owners to have ships built abroad? [HON. MEMBERS: "No."] Does the right hon. Gentleman not agree that this scheme will encourage people to build abroad instead of in this country?

Mr. Soames: It is not a question of encouraging, as the hon. Member well knows. My right hon. Friend the Minister of Transport has had consultations with leaders of the fishing industry and their views will be taken into account when the arrangements are made.

Mr. Prior: Is it not a fact, though, that what is worrying the British shipbuilding industry is that the competition may not be fair? Will the right hon. Gentleman confirm that it will be fair? Will he furthermore confirm that if the fishing industry needs ships but cannot always get them built at home, it is very much up to the shipbuilding industry to see that it supplies the fishing vessels which are required?

Mr. Soames: Yes, Sir. As to the question of fair competition, I assure my hon. Friend that the arrangements will be such as to ensure that our grants will not be used in such a way that the competitive position of British yards would be prejudiced in any way by competition from yards abroad which can be shown to be in receipt of a material element of subsidy.

Mr. Wall: asked the Minister of Agriculture, Fisheries and Food, what new discussions he has had with representatives of the fishing industry about proposals to extend the grants and loans scheme to foreign-built trawlers.

Mr. Soames: Proposals on the procedure to be followed when applications to build abroad are made to the White Fish Authority have been circulated to the fishing interests concerned, and have been discussed with the builders by my right hon. Friend the Minister of Transport and his Parliamentary Secretary. These proposals are being finally adjusted in the light of the comments of both industries.

Mr. Wall: Can my right hon. Friend say whether the British Trawlers Federation and similar organisations are sympathetic to the Government's view? Can my right hon. Friend explain the methods that we shall use to get fair competition as between British yards and foreign yards?

Mr. Soames: First, I assure my hon. Friend that we have had no representations from the British Trawlers Federation or from other fishing interests against the Government's proposals. Secondly, the purpose of the procedures that we shall be laying down will be to ensure that British yards have an equal chance to compete. That is obviously most important. The matter will be divided into two. First, an applicant who wishes to place an order abroad will be required to obtain tenders from a sufficient number of yards in the United Kingdom to ensure that a genuine opportunity to compete has been given to our home yards. Secondly, in such cases, the same specification in as complete a form as practicable will be issued to each competing yard to ensure that the tenders can be assessed on a common basis.

Mr. B. Harrison: asked the Minister of Agriculture, Fisheries and Food if he will estimate the payments on home-and foreign-built white fish and herring vessels, separately, each year under any schemes made after the Sea Fish Industry Bill becomes law.

Mr. Soames: It is not possible to forecast over the years ahead how many people will take advantage of the grants

available under these schemes, or how many of them will wish to have vessels built abroad.

Mr. Harrison: Is it not extremely risky that my right hon. Friend should introduce a scheme like this, which may drain foreign currency reserves, and so on, without having any form of estimate about what is involved?

Mr. Soames: It is obviously quite impossible to say how many owners who would otherwise have had vessels built in home yards would have them built in foreign yards. One's estimate must be based on whether one has confidence in the competitive ability of our shipbuilding industry, and this we have.

Mr. Peart: Is not the Minister aware that people outside this House believe that the Government are letting down British shipping interests? Will he ensure that this matter is reconsidered? After all, this is a vital matter which concerns not only the shipping industry as a whole but the nation.

Mr. Soames: It is not my information that people outside the House think what the hon. Gentleman chooses to say they think.

Mr. P. Williams: It is not good enough to say that the British shipbuilding industry will be treated equally with foreigners. It should be treated preferentially. Can my right hon. Friend explain what possible justification there can be, under any circumstances, for paying British taxpayers' money to foreign competitors? Also, can he say what Parliamentary control there will be over this expenditure?

Mr. Soames: The justification is that to continue as we have been doing in the past now that we have to alter the scheme in any case to bring in the larger vessels would be contrary to our international obligations.

Mr. Hector Hughes: Does not the Minister realise that it is thoroughly unpatriotic as well as illogical and impracticable to consult the experts in the fishing industry after instead of before deciding on this atrocious policy? Will he reconsider the matter and change his policy so that justice can be done to British shipyards and British shipyard workers?

Mr. Soames: I assure the hon. and learned Gentleman that we have consulted the British fishing interests and that they are not opposed to the schemes which have been put forward by the Government.

Lady Tweedsmuir: In these discussions, was my right hon. Friend satisfied that no order would go to a foreign yard which was in receipt of some form of hidden subsidy from its own Government either in tax turnover or by other financial arrangements of that kind?

Mr. Soames: We shall be setting out to ensure in the rules that we shall be laying down within the schemes that advantage is not given to foreign yards which are in receipt of any material subsidy.

Farm Animals (Unnecessary Suffering)

Mrs. Castle: asked the Minister of Agriculture, Fisheries and Food whether he will consult the National Farmers' Union with a view to taking steps to prevent the infliction of unnecessary suffering to farm animals by the methods used for castration, the dehorning of calves and the docking of sheep.

Mr. Soames: I am sure that in general farmers are concerned for the wellbeing of their animals. The Protection of Animals (Anaesthetics) Act, which provides against unnecessary suffering to animals from operations on sensitive tissue or bone structure, was brought in in 1954, with the support of the veterinary profession and of the Animal Welfare Societies, the National Farmers' Unions and the National Cattle Breeders' Association.
Fresh thought is, however, being given to this matter. I am in touch with the veterinary profession, and I am expecting to receive from them suggestions on any improvements that can be made. I will then, of course, consult the National Farmers' Union, the Animal Welfare Societies and the other interests concerned.

Mrs. Castle: While thanking the right hon. Gentleman very warmly for that sympathetic reply, may I ask whether he would not agree that we cannot be too vigilant in this matter of preventing

unnecessary suffering? When the right hon. Gentleman receives the report on the need to bring the Protection of Animals Act up to date, particularly in the use of anaesthetics on farms, will he contact the Home Secretary with a view to introducing amending legislation?

Mr. Soames: I am grateful to the hon. Lady for the patience she has shown in keeping this Question on the Order Paper for about two months before I have been able to answer it. I take the point she has made. We have said that we would see whether improvements could be made. It is almost eight years since this Measure was before the House, in 1954, but if we can see the possibility of making any necessary improvement in the legislation we will certainly do our best to have that improvement made.

Rabies

Mr. A. Royle: asked the Minister of Agriculture, Fisheries and Food if he will allow Service men's dogs, returning from the rabies-free island of Cyprus, to be excluded from quarantine regulations when entering the United Kingdom, provided they travel in sealed containers.

Mr. Soames: No, Sir. I do not think it would be right to relax our strict quarantine arrangements which have kept the country free from rabies for so long.

Mr. Royle: Will my right hon. Friend look at this matter again? Is he aware that considerable hardship is caused unnecessarily to Service men by a regulation which does not apply to Eire, which is not a member of the Commonwealth? Cannot an exception be made also for Cyprus, which is a member of the Commonwealth?

Mr. Soames: The whole of the British Isles, including Eire, has exactly the same quarantine arrangements. Indeed, the veterinary surgeons who see that these arrangements are implemented go to the same colleges, and for the purpose of quarantine Eire and the United Kingdom are considered as one entity. It is not so in the case of Cyprus. We would not think it right at present to extend the boundaries of our protection without the British Isles.

Mr. Wall: In that case, would not my right hon. Friend look at the whale question? Is it not clear that there are now satisfactory ways of immunising dogs? Should we not relax these very strict regulations which cause great hardship to animal lovers?

Mr. Soames: It is easy to talk in terms of perfectly satisfactory ways of immunising dogs, but experience has shown that even the most modern vaccines are not 100 per cent. efficient. This is a most terrible disease. We have not had it in this country, except in quarantine, for about forty years. Indeed, the World Health Organisation has advised that those countries which impose quarantine should continue to do so. Whereas 3 million dog licences are issued each year in this country, only about 3,000 dogs, or 0·1 per cent. of that total number of dogs, come into the country and we do not wish to put at risk our indigenous dog population.

Mr. Royle: Is it not a fact that the veterinary surgeons in Cyprus were trained at the same colleges as those in Eire and, therefore, the argument that applies to Eire ought to apply to Cyprus?

Mr. Soames: It would be a very wide extension to go from the British Isles way out to Cyprus. Dogs belonging to Service men move from Germany to Cyprus and we would not have anything like the same control as we have at present.

Mr. Lagden: Could my right hon. Friend give an undertaking to look at this whole question of quarantine himself now and again and not rely too much on the advice of the Civil Service, which is apt to be handed down and not reviewed as often as it should be?

Mr. Soames: I assure my hon. Friend that I have given a good deal of consideration to this problem and I have had the fullest consultations with representatives of the veterinary and medical professions.

Bacon (Imports)

Mr. Peart: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the increase in bacon imports.

Mr. Soames: Bacon imports during the first five months of 1962 at 168,000 tons were almost identical with the volume of imports in the corresponding period of 1960 although 10 per cent. up on last year. But the hon. Member will remember that last year Danish imports to this country were affected by strikes in Denmark and at the London Docks.

Mr. Peart: Is the hon. Gentleman aware that this matter was debated in an Adjournment debate initiated by one his hon. Friends on 6th June when it was shown that imports for the first four months of this year were £2½ million more than for the same period last year and that the farming community is concerned about it? Is there not a danger that very soon the subsidy problem will again have to be faced by the Government and we may require an increased estimate at a later date?

Mr. Soames: Imports of bacon from January through to May totalled 170,000 tons in 1960 and 153,000 tons in 1961. The total was then well down because of strikes in Denmark and this country. This year the total is 168,000 tons, which is about the level at which imports have stood, apart from last year, for quite a period of time.

Sir G. Nicholson: Is my right hon. Friend altogether happy about the size of the present home pig herd? Will he give us his views?

Mr. Soames: I am anxious that production at home should have regard to market requirements. At the Annual Price Review the year before last, we brought in flexible guarantee arrangements designed to encourage the keeping of our herd at about 10·5 million certifications each year. We impose a disincentive if the herd rises above that figure and an incentive if it falls below it. This was agreed with the National Farmers' Union. It looks from the movement in the size of our pig herd since that was introduced as if the disincentive has not been sufficient, and I must give warning that if expansion continues at the present rate, arrangements will have to be considered at the next Review substantially to modify it.

Lincolnshire River Board (Fishing Licences)

Mr. Taverne: asked the Minister of Agriculture, Fisheries and Food what


representations he has had from the Lincolnshire River Board for increased fishing licence duties.

Mr. Vane: My right hon. Friend has received no representations from the river board, but I understand that it gave notice in the local Press on 22nd June that it intends to seek his approval to certain increases in duty.

Mr. Taverne: Is the Minister aware that the proposed increases as published in the Press would mean more than trebling the existing licence duties and that this has caused great concern to over 70,000 people who hold licences to fish from the Lincolnshire River Board? Will he, before giving approval, take into account the fact that any such change would make these licence duties the highest in the country, and will he ensure that the amount eventually fixed is not such that the anglers will be subsidising other activities of the river board?

Mr. Vane: The proposals cannot in any case be submitted for approval until the end of this month. Before deciding whether or not to approve them, my right hon. Friend will have to take into account any objections received, which, no doubt, will include the points which the hon. Gentleman has made, and he may consider that it is a case for holding a public inquiry, though this, of course, will have to be decided in due course. The new duties, if they were approved, could not take effect until 1st January next.

Meat (Prices)

Mr. C. Royle: asked the Minister of Agriculture, Fisheries and Food if he will state the comparative prices which livestock realised in auctions in the weeks ending 19th May and 23rd June; and if he will take steps to notify the public of any changes which have taken place.

Mr. Darling: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the recent movements of meat prices.

Mr. Soames: Wholesale beef prices declined gradually from the beginning of the year until towards the end of May, when they began to rise. Market prices for cattle in the week ending 19th May

were 138s. 2d. and in the week ending 23rd June, 145s. 7d. per cwt. liveweight. Wholesale prices of home produced lamb have been falling gradually as numbers increased. Prices for sheep in the same two weeks were 40·5d. and 33·5d. per 1b. deadweight. Pigmeat prices have been falling with the increase in home production and with the seasonal slackening of demand. Auction prices for pork pigs in the same weeks were 34s. 8d. and 31s. 8d. per score deadweight. Recently bacon prices have been firmer. Fatstock market and wholesale prices are readily available for those who wish to make use of them. They are regularly quoted in the agricultural and local Press and in some national papers.

Mr. Royle: I am much obliged for those figures, and I apologise to the Minister for having demanded such a long list.
Is the right hon. Gentleman aware that, in relation to the figures he has just given, wholesale prices at Smithfield Market in May rose by an average of 20 per cent. and this 20 per cent. was in no way passed on to the general public? In view of his implied threat to the retail trade on 22nd May—if I may put it to him in this way—would it not have been better to have awaited the present figures which he has just given, and will he do something to alleviate the concern in the retail trade as a result of that implied threat? Would it not be better to wait until we have the report of the committee of inquiry which he has set up?

Mr. Soames: I was not talking in terms of an implied threat. What I said, which is still true today, was that we expected that during the later summer months, when we had a considerable increase in the number of cattle and sheep coming on the market, there would be a considerable falling off in wholesale prices as we had last year, though this would come some months later this year than it did last year, and we expected to see a corresponding drop in the shops when that time came. Meanwhile, during May, as the hon. Gentleman has said, the grass having come considerably later this year than it did last year because of the weather, wholesale prices have been firm and the


prices in butchers' shops have been realistic in relation to the wholesale prices.

Mr. Darling: Although it may be true that beef prices are realistic in the sense that wholesale prices have gone up and, therefore, retail prices should follow, is it not a fact that, although pig prices in the markets are down, retail prices of pork have not come down to anything like the same extent even taking into account the fixed costs in wholesaling and retailing? If this situation continues, will not the Minister have to ask for increased money to pay for the increased subsidies by an additional Estimate? Rather than wait for this committee of inquiry, ought we not to take action now to deal with the situation? Why not have a system of guaranteed prices working throughout the trade?

Mr. Soames: I do not quite know what the hon. Gentleman means by a system of guaranteed prices working throughout the trade. If he means control of the prices of meat throughout the trade, we should not countenance that at the present time. I look forward to the results of this inquiry being very helpful for the long-term future. As regards this year's Estimates, I learned last year how difficult it is to make accurate forecasts, but, so far, in the first quarter of this year, I have no reason as yet to suppose that the estimates we have made for the current year will be falsified by events.

Mr. Royle: Reverting to the Minister's reply to my supplementary question, does not he think that, after saying things about possible decreases in prices, he ought to give similar publicity to increases in prices?

Mr. Soames: Movements in wholesale prices and the prices at Smithfield Market are readily available for anyone who wants to publish them.

Forestry

Mr. Boyden: asked the Minister of Agriculture, Fisheries and Food how many other schemes similar to the profitable joint forestry enterprise of the Liverpool Corporation and the Forestry Commission at Lake Vyrnwy are in

operation; and how many similar schemes are contemplated.

Mr. Vane: The Lake Vyrnwy scheme is the only one of its kind. The Forestry Commission has no similar schemes in view, but it is always prepared to consider proposals from local authorities.

Mr. Boyden: In view of this very successful collaboration between the local authorities and the Commission, will the Minister consider encouraging the Forestry Commission to plant, in conjunction with the local authorities, derelict land such as pit heaps and places of that kind, particularly in County Durham?

Mr. Vane: In the course of its years of operation, the Forestry Commission has purchased a great deal of derelict land and planted it, to the benefit of local districts as well as of our timber supply; but I think that the hon. Gentleman has something rather wider in mind, and I shall consider what he has said.

Forestry Commission (Report)

Mr. Boyden: asked the Minister of Agriculture, Fisheries and Food what effect the economic crisis, referred to in the 42nd Report of the Forestry Commissioners, has had on the Commission's programme for 1962–63.

Mr. Vane: The economies already effected by the Commission in minor works, in response to the Chancellor's drive for economy in Government Departments, will not affect the planting programme.

Mr. Boyden: Will it affect the industrial staff? There was a reduction of 98 in the industrial staff and an increase of 10 in the non-industrial staff last year. Can the hon. Gentleman guarantee at least that the number of industrial staff will be maintained and, if possible, increased?

Mr. Vane: The number of industrial staff will, of course, depend upon the work there is for them to do. Since the Commission is continuing to expand its work, the assumption is that there will, as the years go by, be a need for a slowly increasing staff. I assure the hon.


Gentleman that there have been no dismissals in the labour force as a result of the minor economies to which I have referred. A few men who have retired have not been replaced.

Mr. Boyden: Why was there a reduction of nearly 100 in the industrial staff last year?

Mr. Vane: The demand for work varies somewhat from area to area according to the amount of planting there has to be done. As the hon. Gentleman knows from his constituency, where this work is important, work in forestry operations is not even throughout the whole life of a plantation. There is a great demand for labour in the preparation of the ground, the planting and the establishment of young plantations, and then there is a tendency for the demand to fall off until a later stage when the crop comes to be realised.

Mr. Manuel: Is not the hon. Gentleman aware of the importance of the necessary thinnings programme which goes on at an increasing tempo in the Forestry Commission's work? Is he certain that the Commission is keeping abreast of the thinnings programme in order that the various forests will reach maturity in the proper way at the proper time?

Mr. Vane: One is, of course, aware of the increasing thinnings problem, which is, perhaps, the biggest problem which the Commission now faces. It is keeping very well up to date with it, but no forester is ever completely satisfied with his thinnings programme.

European Economic Community

Mr. W. Hamilton: asked the Minister of Agriculture, Fisheries and Food if he will now make an authoritative estimate of the increase in food prices which will result from entry into the European Economic Community.

Mr. Soames: We are concerned in the negotiations to agree terms with the E.E.C. so that the necessary rises in food prices will be at a gradual and reasonable rate over a period of years. The extent of the increase by the time the full common market stage was reached —which on the Six's own timetable will not be until 1970—would depend on the level at which prices to producers in the

enlarged Community are eventually determined. It is impossible to forecast what these prices will be eight years from now, or, indeed, what they would be by then if we stayed outside the Community. I cannot therefore estimate by how much our accession to the Community would increase food prices in this country, compared with what they otherwise would be. But I would not expect the increase to be large; and there would be compensating factors of which an important one would be a considerable reduction in the farm subsidy bill met by the taxpayer.

Mr. Hamilton: I am now as wise as I was before the Question was tabled. Can the Minister tell us what the weekly increase per head of the population will be? That is what we want to know. Will he confirm that the increase per head of the population will be quite substantial and that it will affect most hardly the lower income groups of the population in which there are many millions of people? Further, will he give the assurance that any consequent reductions in taxation will be given to the lower income groups and not to other wealthier sections of the community?

Mr. Soames: The hon. Gentleman is asking me to be clairvoyant, and that I do not claim to be.

Lady Tweedsmuir: Can my right hon. Friend say, when we go on to a different system of support prices for agriculture under the Common Market——

Mr. Nabarro: If we go in.

Lady Tweedsmur: —if or when—to what extent the reduction in indirect subsidies will offset the rises in food prices?

Mr. Soames: One cannot give the exact figures, for the reasons which I gave in my Answer, but obviously there will be a considerable offsetting through a reduction in taxation. Whether it will be 100 per cent. or to what extent it will be lower, one cannot tell.

Mr. Peart: The Minister is emotionally susceptible to the European concept. That was obvious from his speech the other day. The simple fact is that the Minister does not know what will happen, and that is what concerns many people in this country and the farming community. Will the right hon.


Gentleman try to give some information from time to time instead of hiding behind general verbiage?

Mr. Soames: If I am asked what the price of food will be in 1970 if we join the Common Market, I really cannot say.

Mr. P. Williams: asked the Minister of Agriculture, Fisheries and Food what reply he has sent to the telegram from the Durham County Branch of the National Farmers' Union regarding the United Kingdom's entry into the Common Market.

Mr. Soames: None, Sir, as it was not addressed to me. But my right hon. Friend was good enough to send me a copy.

Mr. Williams: Then will my right hon. Friend be good enough to send me an answer some time? Is he aware that this telegram referred to the fact that Durham farmers are sick of platitudes and sick of the absence of any clear-cut statement of Government policy and that they look to the Government and to the Opposition for the fulfilment of the unqualified undertaking so often given in the past? Will my right hon. Friend give an unqualified undertaking to the British farmers that their interests will be safeguarded?

Mr. Soames: I understand that the purport of the telegram sent to my hon. Friend and to other hon. Members representing Durham constituencies was that the Durham County Branch of the National Farmers' Union was anxious whether the assurances given by the Government before we entered into negotiations that we would have in mind the preservation of the vital interests of the agricultural community still applied and the answer is, "Yes, Sir".

Mr. Peart: Is the Minister aware that officials of the Durham County Branch of the N.F.U. met the northern group of Members of Parliament on the Opposition side and were satisfied with the Opposition's approach?

Mr. Soames: If that is the case, the farmers of Durham must be awfully clever.

Potatoes

Mr. Donnelly: asked the Minister of Agriculture, Fisheries and Food if

he will make a statement about the Pembrokeshire early potato crop.

Mr. Soames: Because of weather conditions the harvesting of Pembrokeshire first early potatoes this year was delayed by about three weeks as compared with last year, but most of the crop has now been lifted. The acreage planted was higher than last year; yields were low at first but have been improving considerably. The quality of the crop is generally good, and indeed better than in previous seasons.

Mr. Donnelly: Is the right hon. Gentleman aware that, arising from his policy, my constituents are very well pleased with the profits which they have made, so well pleased in fact that they are contemplating erecting a statue to him at Haverfordwest? The one difficulty is the inscription. They are wondering whether they should use the form of a famous figure of the 1930s and call it "Captain Potato Soames", or whether he would prefer the Welsh traditional description of "Soames the Potato".

Mr. Soames: I have a sneaking feeling that the hon. Gentleman thought up that supplementary question before he heard my Answer.

Lady Tweedsmuir: asked the Minister of Agriculture, Fisheries and Food how many representations he has received from the National Federation of Fish Fryers concerning the shortage of potatoes.

Mr. Soames: Since the end of last September, I have received three letters from the Federation urging that imports of main crop potatoes should be allowed. Two of these came in 1961 when the development of any serious shortage could not be foreseen, and one in March a few days before imports were in fact permitted.

Lady Tweedsmuir: Can my right hon. Friend say how it was that the Potato Marketing Board was so completely inaccurate in its forecast that there would he no shortage of potatoes? What action is my right hon. Friend taking, not only to try to ensure that a shortage on this scale does not recur, but also to improve the quality of home-grown potatoes?

Mr. Soames: Concerning the estimate for this year and the quantity of potatoes that would be forthcoming, it was not until the March census was taken by the Potato Marketing Board that it was seen what a heavy toll the severe weather in the late winter had had upon the potatoes that were in clamps. The yield gathered out of the ground from the acreage planted was almost exactly the quantity that the country consumes, but the weather took its toll in the late winter. As to the future, this is not a quota year, as my hon. Friend will appreciate, and it was up to farmers to plant what they wished, which is well in excess of anything we are likely to need. There was, however, a shortage of seed, which will reflect itself in the acreage planted. The quality of potatoes is something which the Potato Marketing Board is trying constantly to improve.

Johne's Disease

Mr. P. Browne: asked the Minister of Agriculture, Fisheries and Food if he will authorise the use of the vaccine to immunise cattle against Johne's disease.

Mr. Vane: The progress of work on this vaccine has been carefully reviewed during the past few weeks. My right hon. Friend hopes to be able to take a decision whether or not he can authorise its general use in about a year's time.

Mr. Browne: Is my hon. Friend aware that this is the third year running that I have asked this Question and that on previous occasions I have been answered by the Minister himself? I am delighted to know that there is a possibility that something will now be done. Does not my hon. Friend think that it would be possible to allow different vaccine to be used in self-contained herds which have a good record with no reactors for a number of years?

Mr. Vane: My hon. Friend knows, I think, that one of the difficulties of using this vaccine is that having vaccinated certain animals it is possible to mask the reinfection of tuberculosis. It is a highly complicated matter, and it would surely be a retrograde step to risk the spread of tuberculosis when we have virtually eradicated it from our cattle. Progress is, however, being made

and, as I have said, it is hoped that it may be possible to tackle this disease seriously in about a year's time.

Flour and Bread (Quality)

Mr. Lipton: asked the Minister of Agriculture, Fisheries and Food what action he is taking to inform the general public of the new Food Regulations which improve the quality of flour and bread sold after 16th July next.

Mr. Vane: I assume that the hon. Member is referring to the Emulsifiers and Stabilisers in Food Regulations. A Press notice was issued when these were made and the details were published in a number of national and trade papers.

Mr. Lipton: Is the hon. Gentleman aware that the vast majority of the public do not know anything at all about this? Twelve years of propaganda was required before this modest improvement in the quality of bread could be effected on 16th July next. To maintain interest in this vital subject, will the Minister give an undertaking that the further very necessary improvement in the quality of bread and flour will not be delayed more than a year or two?

Mr. Vane: Before the hon. Member put down his Question, we had decided to issue a further notice to the Press immediately before the Regulations come into force later this month. I assure the hon. Member that we are making progress in what are really the more important Regulations dealing with bread.

Mr. Lipton: Within the next two years?

Mr. Vane: I hope in a matter of months.

Oral Answers to Questions — MINISTRY OF AVIATION

Pilot Licences (Fees)

Sir E. Errington: asked the Minister of Aviation if he will give the reasons for the large increase in fees for renewing pilots' licences as outlined in the Civil Information Circular No. 43/1962.

Mr. Brockway: asked the Minister of Aviation what increase in the cost of a pilot's licence has been imposed; and what consultations took place with the trade unions concerned.

The Parliamentary Secretary to the Ministry of Aviation (Mr. C. M. Woodhouse): These increases are intended to reduce the loss to the Exchequer which the issue and renewal of pilots' licences involve. The present fees are set out in the information circular to which the hon. Member for Aldershot (Sir E. Errington) refers. The specific fees were not the subject of consultation, but substantial increases were forecast in the Command Paper "Aviation Safety" which was presented to the House on 16th April.

Sir E. Errington: Does not my hon. Friend realise how great these increases are? The basic increase is from £1 12s. 6d. to £5 10s. 0d. Will he reconsider the matter?

Mr. Woodhouse: I appreciate that these are very serious increases, but I ask my hon. Friend to bear in mind that for some years we have conducted the service of examining and issuing licences at a substantial loss to the Treasury. One of the consequences has been that far too many pilots have presented themselves for examination unprepared. We do not believe that this is a satisfactory situation.

Mr. Brockway: Is it not the case that in correspondence with me the hon. Gentleman has said that one of the reasons is to prevent an excessive entry for the examinations? Would it not be possible to charge an entrance fee for these examinations rather than this increase of more than 300 per cent. in the cost of the licence?

Mr. Woodhouse: I do not recall using the exact expression "excessive entry". What we are aiming to do is to make sure that any pilot who presents himself for examination does so fully prepared. I do not follow in what way an entry fee would differ from our present system.

Mr. Burden: Will my hon. Friend ask his right hon. Friend to have another look at this? This is an increase of more than 300 per cent.—an enormous increase. At least, it should not have been undertaken without previous consultation with the British Air Line Pilots' Association. Does my hon. Friend not appreciate that these constant rises in the public sector are irritating and annoy-

ing, not only to members of the public, but also to Members of this House?

Mr. Woodhouse: I must repudiate my hon. Friend's remark about constant rises. There has been no rise in these fees since 1958, and they are still low in relation to the cost to the Treasury of providing the service. As I have said, there was no consultation with the British Air Line Pilots' Association. We knew very well what its reaction was bound to be, but we forwarded to the Association a copy of the White Paper before it was published. That White Paper contained a forecast of increases and the British Air Line Pilots' Association did not then indicate, and has not subsequently indicated, that it felt that it should be consulted.

Mr. Lee: Would the hon. Gentleman not agree that this is a fantastically high increase at one go? Now that he has heard the opinions of hon. Members, on both sides, would he not agree to ask the Pilots' Association to meet the Ministry and to hear its representations? Certainly, if the Association has not made representations to the Minister, it has made them to many of us. I am sure that it would be the feeling of the House that instead of rather disgracefully ignoring a bona fide trade union of this type, it would be a good thing if, even now, the Minister agreed to meat the Association and to postpone the application of these increases until that is done?

Mr. Woodhouse: I agree that the increases are high, but not that they are fantastically high, as the hon. Member suggests. My right hon. Friend is, of course, always ready to meet the Association if it wishes to meet him, but I cannot give any undertaking that the increases, which are already in effect, will be withdrawn.

Mr. Brockway: In view of the unsatisfactory nature of that reply, I give notice that I will raise this matter at the earliest opportunity on the Adjournment.

Avro 748

Mr. Donnelly: asked the Minister of Aviation whether he is yet in a position to form an estimate of the probable delivery date of the Government's order for Avro 748 military aircraft; and how this compares with the delivery date of the Handley Page Herald.

Mr. Woodhouse: I have nothing to add to what I told the House in the Adjournment debate on 4th April last.

Mr. Donnelly: Is the right hon. Gentleman aware that he should have something to add, and if he does not have an accurate estimate of delivery dates, he should (have made inquiries? Is it not a fact that the Avro 748 has been chosen before the military Herald simply because it is the Government's policy to encourage the companies that have amalgamated? Is it not a fact that this is an expenditure of public money on an aircraft which will be later than the military Herald, which fact in itself is prejudicial to the Armed Forces?

Mr. Woodhouse: No, Sir, that is not the case. I set out the reasons for the choice at some length when I spoke on 4th April. On the essential point of completion of delivery to the Royal Air Force of either aircraft, the time scale was the same.

Mr. Mason: Is the Minister not aware that the Herald has been tested and will be in production sooner than the Avro 748, that it suits the needs of the Royal Air Force and that, indeed, the R.A.F. prefers it? It is a cheaper aircraft to buy than the Avro 748. Will the hon. Gentleman now state briefly why orders were placed for it?

Mr. Woodhouse: I set out the reasons much more than briefly in speaking on 4th April and I have nothing to add Ito what I then said.

Royal Aircraft Establishment (Telephonists)

Sir E. Errington: asked the Minister of Aviation whether he will now announce his decision in regard to the rise in pay for industrial telephonists at the Royal Aircraft Establishment, Farnborough; and whether he will make a statement.

Mr. Woodhouse: The pay of industrial telephonists at the Royal Aircraft Establishment, Farnborough, is not a matter for my decision. Increases in pay for all female industrial telephonists in the Civil Service, in stages from 1st January, 1961, to 1st January, 1963, were approved by the Treasury last month. Accordingly, payment is being

made this week at the new rates, including the arrears. The pay of male industrial telephonists at Farnborough is on a different basis and remains unchanged, but from 1st January next both male and female industrial telephonists will receive non-industrial status and common scales of pay.

Sir E. Errington: Is it correct that up to 1st January, 1963, females are receiving more than male telephonists? Also, have any arrangements been made to preserve the differentials in respect of supervising telephonists?

Mr. Woodhouse: It is the case that in some age groups female telephonists will get more than men between now and 1st January next year. This is an inevitable consequence of the fact that the rates are negotiated within separate negotiating machineries. There are three supervisors at Farnborough, and they are all G.P.O. staff and will, therefore, receive the 4 per cent. increase in the national rates announced last Friday.

Factory, Christchurch

Mr. Cordle: asked the Minister of Aviation what further progress has been made in his negotiations concerning the Christchurch factory; and to what extent these negotiations will ensure continuity of employment for all those who work there.

Mr. Woodhouse: A number of inquiries have been received and the factory has been inspected by several firms. Until a definite offer is received, I cannot say what the employment prospects will be. It must, however, be recognised that there may be an idle period after de Havillands leave on 30th September.

Mr. Cordle: What arrangements are being made to absorb in other industries in the travel-to-work area the 400–500 employees who will be redundant at the end of this month?

Mr. Woodhouse: That is not a question for my Department.

Mr. Lee: Were we not told on one occasion that there had practically been agreement with one firm to take over the factory? What has happened about that? Is the Ministry asking a rental which the firm considers too high, or is the factory itself too big, in which event


could not the right hon. Gentleman reach agreement for a tenancy of part of it?

Mr. Woodhouse: It is the case that the Beagle Aircraft Company was at one time very much interested in the factory and was very near to making an agreement to take it. Its reasons for finally withdrawing were not due to the level of rent set by the Ministry. They were due to other considerations of its own.

Aircraft Noise

Mr. Shepherd: asked the Minister of Aviation whether he is satisfied that the regulations governing the level of noise at United Kingdom airports do not involve the risk of using inadequate power or dangerous throttling back on take-off; and if he will make a statement.

Mr. Woodhouse: I am satisfied that the procedures for noise abatement do not involve any risk which would prejudice safety. They have been worked out in collaboration with the International Air Transport Association and with their full agreement.

Mr. Collard: Is my hon. Friend aware that in the case of modern long-range aircraft take-off at full load is the most critical part of the flight and that at that time the captain's attention should be directed entirely towards making a safe and efficient take-off and that it is undesirable that his attention should be diverted in any way by consideration of whether he is making too much noise?

Mr. Woodhouse: Yes, Sir; I am very well ware of all those considerations. In fact, the noise abatement procedures do not require the pilot to reduce speed or undertake any kind of manœuvre below 1,000 feet.

Prestwick Airport (Hotel)

Sir T. Moore: asked the Minister of Aviation what further steps he will take to obtain fresh tenders for the erection of the hotel at Prestwick Airport.

Mr. Woodhouse: The Ministry of Aviation has written to all the concerns who have at any time expressed interest in the proposition, to enquire whether there are any points in the terms proposed which have discouraged tenderers,

and whether they wish to suggest an alternative basis on which they would be prepared to tender. Any suggestions will be examined, and if they are acceptable, invitations will be issued to all the concerns to tender on the amended basis.

Sir T. Moore: While thanking my hon. Friend for that reply, which shows a very close appreciation of the difficulties involved in building this hotel, may I ask him whether it is not obvious that as only one tender was received and it was unacceptable, the terms which have been put into the contract must be so rigid, unremunerative and complicated that no contractor can even afford to tender?

Mr. Woodhouse: I have a great respect for the business shrewdness of my hon. Friend's fellow countrymen, but in this case I do not understand why the terms should be regarded as rigid. One of the terms that we expressly proposed to tenderers was that they themselves should quote how much they would be prepared to pay in terms of a percentage of the gross takings as the price of the concession.

Mr. Emrys Hughes: Can the hon. Gentleman say whether the hotel at Prestwick is to be run in the interests of the nation, which was responsible for the heavy expenditure on Prestwick, or is to be handed over to speculative private enterprise?

Mr. Woodhouse: It is out to tender in the normal commercial way.

Eurocontrol (Navigational Aids)

Mr. Cronin: asked the Minister of Aviation what progress has been made in the evaluation of a navigational aid to meet the requirements specified by Eurocontrol; and whether any representations have been made by the United States Government or by any United States aviation organisation that these requirements should be changed.

Mr. Woodhouse: Arrangements are now being made by the Eurocontrol Association to conduct tests of a navigational aid known as HARCO. No representations of the kind described have been put before the Eurocontrol Association.

Mr. Cronin: Does the hon. Gentleman recollect that in 1959, partly as a result of the inactivity of the British Government, United States aviation organisations induced the international civil aviation organisation to standardise on a form of equipment which was quite inferior to the British equipment then available? Will he make sure that on this occasion a navigation system is adopted on the ground of technical merit and not from political pressure?

Mr. Woodhouse: I recollect the decision in 1959, though not the part in it ascribed by the hon. Gentleman to my Department. The decision in the case of Eurocontrol will be taken by the Eurocontrol Association, and it will certainly be taken on the ground of technical merits. We, as members of the Association, will have a substantial influence in the consideration of the type of navigational aid to be adopted, and we have a larger weighted vote than any other member.

Civil Aviation (Licensing) Act, 1960

Mr. Cronin: asked the Minister of Aviation what changes he intends to make in the implementation of the Civil Aviation (Licensing) Act, 1960, in so far as it falls within his responsibilities, in view of the British Overseas Airways Corporation-Cunard merger.

Mr. Rankin: asked the Minister of Aviation if he will now introduce legislation to amend the Air Transport Licensing Act to bring it into line with his policy regarding air transport changes.

Mr. Woodhouse: No changes in the Civil Aviation (Licensing) Act, 1960, or in its implementations are necessary as a result of the recent agreement between British Overseas Airways Corporation and Cunard, or of any other changes that I am at present aware of.

Mr. Rankin: Is the hon. Gentleman aware that his right hon. Friend told us last Tuesday that merging the United Kingdom effort on the North Atlantic was a useful decision because of the fierce competition on those routes? How, then, can he justify dividing our United Kingdom airways' effort on the European routes, where competition is equally fierce?

Mr. Woodhouse: My right hon. Friend was referring to international competition. The agreement between B.O.A.C. and Cunard Eagle arose from the companies themselves and was not due to any policy initiated toy my right bon. Friend.

Mr. Cronin: But do not the arguments used by the Minister of Aviation last week apply equally to B.E.A. or to the other B.O.A.C. routes? Can the hon. Gentleman assure us that this is merely another example of Government muddle and not an attempt to introduce denationalisation of the Corporations by the backdoor?

Mr. Woodhouse: I can assure the hon. Gentleman that it is neither an example of Government muddle nor an attempt to introduce denationalisation by the back door.

Mr. P. Williams: Is my hon. Friend aware that this merger may have become inevitable but should not have become inevitable if the Minister had not refused a licence to Eagle Aviation for the Atlantic route earlier in the year, and that it is ridiculous to waste the time of the House by bringing in a Civil Aviation (Licensing) Act one year only to undermine it two years later?

Mr. Woodhouse: No, Sir. My right hon. Friend's decision last year was taken on the merits of the case and does not in any way affect the operation of the Act.

Mr. Lee: Is the hon. Gentleman saying that the Civil Aviation (Licensing) Act, 1960, is intended to deal only with international competition? Surely he will recollect that long before 1960 there was a complete public monopoly on the North Atlantic route? Then we had the whittling down of it, and in 1960 we had the Act, which gave the possibility of licences for independent airlines. We now have a position where the one independent airline which could do anything about it is inside the combination with B.O.A.C. What is the point of keeping on the Statute Book that part of the 1960 Act which deals with the need for competition?

Mr. Woodhouse: I was not suggesting that the Civil Aviation (Licensing) Act was concerned with international competition. I was explaining to the hon.


Member for Glasgow, Govan (Mr. Rankin) the significance of a point made by my right hon. Friend in his reply last week. The decision between B.O.A.C. and Cunard-Eagle affects just one sector of international aviation. It does not in any way affect any other sector which is covered by the Act.

Mr. Burden: As the Minister kept the Cunard-Eagle Company off the North Atlantic, on the basis that there was already sufficient capacity to take care of all growth on all B.O.A.C. routes in the next five or six years, upholding the decision of the Appeal Commissioner on that basis, why does he now put Cunard-Eagle on the North Atlantic in another guise?

Mr. Woodhouse: My right hon. Friend has not put Cunard-Eagle on the Atlantic in another guise. He has simply approved an arrangement between two companies reached between themselves.

Mr. Rankin: Is not the hon. Gentleman aware that the effect of the 1960 Act is the same on the European and Middle East areas as it is on the North Atlantic? If dividing our effort on the North Atlantic is bad, how can dividing our effort on the European and Eastern routes be good?

Mr. Woodhouse: The effect of the 1960 Act was to permit competition, not to make competition compulsory. It still remains open to any airline operator to compete, or to make pooling arrangements, or not to compete, as he may choose.

INCIDENTS, TRAFALGAR SQUARE

Mr. Shinwell: I desire to raise a point of order, Mr. Speaker, about which, through your private secretary, I have given you notice.
This morning I telephoned the Home Office to direct its attention to a serious disturbance which occurred in Trafalgar Square yesterday, when 3,000 people were alleged to have been present, when several people were arrested, and, I believe, some injured and, so I understand from the Press, when many police officers were also present.
I asked the Home Office whether it would accept a Private Notice Question, the intention of which was merely to elicit a statement from the Home Secretary. I discovered subsequently that it was ready to answer such a Question.
Later, I learned, after submission to your office, that, because you regarded the question as not being one of urgency, you decided not to grant permission. I wish to submit, with great respect, that this decision is somewhat unprecedented, because the matter is regarded as urgent Press comments indicate that the disturbance is a matter of urgency and it appears to me that the public requires some reassurance from the Home Secretary that these disturbances can be prevented in future. That is why I wished to put the Question.
However, you decided otherwise, and, although I recognise that I have no right to ask you to explain why you refused, the fact is that I have learned that your reason was that you did not regard the matter as one of urgency, and I submit to you that your decision requires further elucidation.

Mr. Speaker: I hope that it can have further elucidation. The right hon. Gentleman will understand that I would most gladly allow that Question, and all others, if I thought it proper to do so. It is much easier and a great deal more agreeable to say "Yes" than to say "No". But I cannot unless I take the view that it is within my power. The House confers that duty on me and I cannot evade it.
On this occasion, after consideration and giving the right hon. Gentleman a chance, indirectly, to make his submissions about it, I did not think that it would be within the Standing Order. That is where the matter is.

Mr. Shinwell: I understand that it was suggested that as the Home Secretary answers Oral Questions next Thursday, a Question might be put then. But it has no doubt occurred to you, Mr. Speaker, that, because the Prime Minister answers Questions from 3.15 p.m. onwards on Thursday, if my Question comes late in the list of Questions to the Home Secretary, it may not be answered. In that event, there would be no opportunity available to hon. Members to put the Question to the Home Secretary for some time.

Mr. Speaker: I understand the right hon. Gentleman's point. I am greatly obliged to him for the courteous way in which he has put this matter. I cannot help it that the duty devolves upon me.
On the fact which he has just mentioned, namely, the probability that a Question for Oral Answer to the Home Secretary on Thursday might not be reached in the ordinary way—it certainly would not be unless we did better than today—the difficulty could be overcome by the concurrence of the Home Secretary in practice which would enable the Question to be answered. That is the right way to proceed without creating a difficult precedent in this matter.

Mr. Fletcher: Further to the point of order. I also sought your leave this morning, Mr. Speaker, to put a Private Notice Question. While I would not in any way want to challenge your Ruling, nevertheless this is a subject which is causing great concern.
As the Home Secretary was prepared to make a statement had you allowed a Private Notice Question, may I ask the Leader of the House whether arrangements can be made for the Home Secretary, with the leave of the House, to make a statement on the subject tomorrow afternoon?

The Chancellor of the Duchy of Lancaster (Mr. fain Macleod): Without committing my right hon. Friend, I can say that I will, of course, discuss that straight away with the Home Secretary.

Mr. Shinwell: In the event of the Home Secretary not being able to answer a Question tomorrow, either because it is unconstitutional or for some other reason, can we have an assurance that on Thursday, at any rate, an arrangement will be made so that the Home Secretary can answer the Question?

Mr. Macleod: My previous answer can cover that. We will consider both a statement tomorrow and, if that is not practicable, a Question could be answered on Thursday, by special leave, at the end of Questions.

Mr. C. Pannell: Will the Leader of the House also consider the precedents in this matter? I think that it was in

1936 that there were Questions and a long debate in the House arising from incidents in the Albert Hall and disturbances from the same quarter. Will the right hon. Gentleman also take into account the fact that the principal party about whom complaint has been made has already been found guilty of a breach of the privilege of the House?

Sir B. Janner: While this matter is being considered, will the Leader of the House ask the Minister of Works whether he would be prepared to answer a Question next Tuesday—he is late in the list of Oral Questions—dealing with a subject upon which a Question has been put to him before by myself, whether he is aware that the tenets of the National Socialists are of such a nature that they are conducive to a breach of the peace?
Now that a declaration has been made openly that they are Nazis, in those circumstances the preaching of murder, which the Nazis preached throughout, should not be allowed in any of our squares.

Mr. Speaker: We cannot wander over the merits of this topic now. The anxiety of the right hon. Member for Easington (Mr. Shinwell) about the Private Notice Question was thoroughly understandable and I am grateful for the opportunity of stating the position as it bore upon me. But we cannot go into the merits of these other things.

Sir B. Janner: Mr. Speaker, may I seek your assistance? This is also a matter for the Minister of Works. Is there any method by which we can get him or the Prime Minister to deal with this matter, which concerns two Departments, apart from others which are seriously affected?

Mr. Speaker: If the hon. Member cares to put down a Question, no doubt it will be considered.

Mr. S. Silverman: Mr. Speaker, I understand from what you have said that the principal reason why you did not feel able to allow my right hon. Friend the Member for Easington (Mr. Shinwell) to put down a Private Notice Question was not any objection to the urgency or importance of it, but had regard to the probability that the matter could be dealt with at an early stage


so as not to justify putting a Question, out of order as it were, on the Order Paper.
But would not that Ruling depend on there being some assurance that the matter was, in fact, to be dealt with adequately within the next day or two? As I understand the Leader of the House, he has not gone further than to say that he will consult his right hon. Friend about whether he will make a statement. This is not sufficient, because if the answer is in the negative, then we shall have lost this opportunity of putting the Question, and shall have no further opportunity of putting it before the end of this part of the Session.

Mr. Speaker: As far as I am concerned, I must try to adhere to the practice of my predecessors, because I am sure that it is right, in the interests of the House, not to give publicly my reasons for allowing or disallowing any Private Notice Question. Accordingly, I hope that there will be no inference about this.

EUROPEAN ECONOMIC COMMUNITY (BRUSSELS NEGOTIATIONS)

The Lord Privy Seal (Mr. Edward Heath): With your permission, Mr. Speaker, and that of the House, I wish to make a statement on the progress of the Brussels negotiations.
A meeting of Ministers took place in Brussels from 27th to 30th June. On 27th June, the Ministers of the European Economic Community met among themselves, and on the other three days meetings between them and the United Kingdom delegation were interspersed with further meetings of the Ministers of the Community.
Ministers devoted most time to the treatment of imports of temperate foodstuffs from the Commonwealth. As I have told the House on previous occasions, this is probably the most difficult and complex of all the issues with which we are faced. In our consideration of long-term solutions, Ministers envisaged that the enlarged Community should negotiate agreements for suitable commodities on a broad international basis.
At the same time, Ministers recognised the need for making alternative arrange-

merits for commodities where international agreements appeared impraticable or had not been concluded by the end of the transitional period.
We also considered what might be the objectives of price and production policies for temperate foodstuffs in an enlarged Community, and what arrangements might be made for the transitional period.
All these discussions have brought out more clearly the nature of our essential requirements in the field of temperate foodstuffs and their crucial importance in these negotiations. We have established some common ground between the Community and ourselves in these matters, and we have indicated to our deputies the lines on which further work should now proceed.
The other main question discussed at this meeting was that of association under Part IV of the Treaty of Rome in relation to both dependent territories and independent countries of the Commonwealth. The members of the European Economic Community have now made substantial progress in developing their own ideas and they will be discussing with the present associates the substance of a new Convention of Association this week.
As I have explained to the House on previous occasions, we have made known to the Community our own views on the content of an association arrangement and I was able to carry this further on this occasion. Ministers also discussed the procedure that might be adopted to enable independent Commonwealth countries to become associated if they so wish. The position of specific countries was not discussed.
Finally, the Ministers noted the provisional agreement recommended by the deputies on the tariff treatment to be accorded to a number of products for which we had requested a zero tariff.
It was agreed that an additional meeting of Ministers should take place on 18th, 19th, and possibly 20th July, primarily to consider the problems of British domestic agriculture, at which Ministers of Agriculture are invited to be present. This will be followed by a further meeting beginning on 24th July.

Mr. H. Wilson: In view of the Government's target of having a clear


proposition by the end of this month, it is obvious that the negotiations are going very slowly indeed. Since the drift of these negotiations now seems to be away from getting any specific guarantees for Commonwealth imports into this country, and on to the basis of a rather vague commodity agreement, and on to the basis of negotiating once we get inside, can the right hon. Gentleman say whether this is now the basis on which the Government are negotiating?
If this is so, since so much depends on the issue of voting by qualified majority, where so much of this is settled, will the right hon. Gentleman say whether he has yet discussed the question of the voting procedure for qualified majorities and, if so, what success he has had, and whether in these negotiations he has borne in mind the clear warning from my right hon. Friend the Leader of the Opposition and others on this side of the House about the need to get adequate figures agreed in relation to qualified majorities?

Mr. Heath: We have made considerable progress over a large field in these negotiations. As I told the House, most of this meeting was devoted to this very difficult problem of the temperate foodstuffs, and here we have made some progress, and certainly all the Governments have obtained a much clearer understanding of the problem. We have made considerable progress on the problem of India, Pakistan and Ceylon, and also on association, and, therefore, our objective remains to obtain the outline of a possible settlement by the end of July.
It is not true to say that we have moved away from specific arrangements for these temperate foodstuffs. We are in agreement, and certainly all the Commonwealth countries concerned are in agreement, with the objective of worldwide arrangements, or arrangements on a broad international basis, if they can be obtained, and it is, therefore, right that in these negotiations we should set out the objectives and means by which we hope they can be obtained. But the requirement for specific arrangements in the transitional period remains.
There has been no discussion during the negotiations about voting rights. I fully appreciate the points raised by the right hon. Gentleman, and their vital

importance, but the time is not yet opportune to discuss them in the negotiations.

Mr. H. Wilson: Eleven-twelfths of the time have passed since we debated this last August. We made clear then the importance which we on this side of the House attached to this problem of the temperate zone foodstuffs. Now, after so much time has elapsed, are we to be told no more than that there is greater progress towards understanding one another's points of view and that we are trying to slide out of this very difficult situation in terms of, first, transitional arrangements which we all recognise are not adequate, and, secondly, long-term commodity agreements, which, (however welcome, will not solve this specific problem?
Is the right hon. Gentleman telling us that he is going to leave to the last hour of the last day this vital question of voting which, by its effect on the qualified majority procedure, will be of fundamental importance if the Government really are proposing that we should go in blind as to what we are signing and hope to influence everything from within?

Mr. Heath: The right hon. Gentleman is producing the most extraordinary series of exaggerations without any justification of any kind whatever. There is nothing in what I have said which shows that we are sliding out of our arrangements or the requirements that we have made for temperate foodstuffs. I always understood that the right hon. Gentleman and his hon. Friends were some of the foremost protagonists of securing worldwide arrangements in these products if we could obtain them. There is no reason why the right hon. Gentleman should be so derisive on this matter.
At for the time, this is a most difficult and complex problem, and everybody has always recognised it. We have devoted a great deal of time and work to it. The deputies will continue to do so during this month, and we shall revert to it again at the Ministerial meeting beginning on 24th July.
As far as voting rights are concerned, the position is clearly understood. There is no question whatsoever of entering into the European Economic Community


blindly and waiting to see how this will work out. The right hon. Gentleman has no justification for saying so.

Sir Richard Pilkington: Will my right hon. Friend dispel the illusion that in these negotiations we regard other members of the Commonwealth as complaining children?

Hon. Members: Answer.

Mr. Healey: Does the Lord Privy Seal feel that his task is assisted in any way by the sort of patronising sneer at the Commonwealth made by the Minister of Labour this weekend?
Will he answer an important question regarding African and West Indian countries in the Commonwealth? Can he say whether the Six have now agreed that it shall be open to these countries, if they so desire, to enjoy association with the Common Market on exactly the same terms as apply in the case of those countries associated similarly with France, Holland and Belgium?

Mr. Heath: As I am sure the House accepts, in these negotiations we are doing our utmost to find suitable arrangements concerning Commonwealth problems. I am sure that my right hon. Friend the Minister of Labour would not wish to have said anything which could have been misunderstood, or which could in any way cause offence to the Commonwealth, because he has devoted a great deal of his political career to working for the Commonwealth. My right hon. Friend went on some of the tours before these negotiations began.
As for the question of association for the members of the Commonwealth, we have discussed the content of association. It remains still to be discussed by the Six with their associates. It is part of that arrangement that there shall be no discrimination between the present associates and the new associates from the Commonwealth.

Mr. Grimond: Can the Lord Privy Seal tell us a little more about the alternative arrangements which he has in mind for commodities which he says are not suitable for international agreement, and whether these arrangements are being discussed with the Commonwealth? Further, can he say whether there is any time limit to the talks due

to begin on 24th of this month—whether they will go on into August, or whether, if agreement has not been reached, it is intended to break off discussions until the autumn?

Mr. Heath: We are in full consultation with each Commonwealth country affected in respect of each provision concerning temperate foodstuffs, and the various proposals put forward at the last meeting by the Six as a means of providing alternative arrangements to worldwide arrangements. They have put forward certain proposals concerned with the technical operation of a common agricultural policy, but these do not meet our requirements, and it was necessary for me to tell that to the members of the Community. The original arrangement was that the meeting should begin on 24th July and that it should be for four days, and we must persevere at that meeting in order to find an outline solution.

Mr. Fell: Surely my right hon. Friend, who has said clearly that all Commonwealth countries agree with his talks on worldwide trading arrangements, must also see that these arrangements cannot possibly be entered into, or act any rate cannot reach any conclusion, before the end of July. At least, I presume that is true. If it is true, how will it be possible for this House or, indeed, the Commonwealth Prime Ministers' conference, to came to any conclusion upon the agreements that the right hon. Gentleman reaches?

Mr. Heath: Perhaps I could make this matter clear to my hon. Friend. This is one part and one part only of the arrangements concerning the provisions for temperate foodstuffs. That is why we have put forward requirements for the transitional period up to 1st January, 1970, which will be overtaken by any worldwide arrangements which may be made by that time. We have also stated that if worldwide arrangements have not been obtained by that date further arrangements must be cleared in these negotiations.

Mr. Shinwell: Why should anyone complain about the statement of the Minister of Labour about the Commonwealth? Is not he an honest man, who has merely expressed the view of the Government as a whole, that the


Commonwealth is now expendable? Is not that so? After these prolonged and protracted negotiations, can the right hon. Gentleman point to any specific guarantee that has been reached on any one of the items? Can he inform the House to that effect? Having had negotiations up to the end of July, does he propose to come to a decision during the Recess? Is that the intention? Ought not we to know?

Mr. Heath: The right hon. Gentleman is becoming very fond of coining phrases, such as "expendable Commonwealth" and "selling the Commonwealth down the river", which bear absolutely no relation to reality. We are negotiating—that is why we have been devoting our time and energies to this matter over the past nine months—to secure appropriate arrangements for the Commonwealth. These negotiations have not been long-drawn-out.
I have examined figures relating to various treaties Which have been joined in modern times. The Treaty of Rome took just on two years to negotiate. These negotiations have so far been going on for only nine months. We are carrying on with every expedition, and it is not an unduly long time for negotiations which, as I have told the House, affect 27 independent countries and 47 dependencies, and are the most complicated and complex of modern times.
Some hon. Friends of the right hon. Member are accusing us of undue haste. That is not the case, either. We are trying to carry on these negotiations with expedition combined with thoroughness.

Mr. Prior: Is my right hon. Friend aware that great surpluses of food are building up in this country, that greater pressures are being put upon our imports of food and upon our own market the whole time, that in the long run worldwide commodity arrangements might be of greater value to Commonwealth countries than the existing arrangements, and that we should do all we can to push these worldwide arrangements in the interests of agricultural producers throughout the world?

Mr. Heath: That is so. That is why the Commonwealth countries supported

proposals of this kind at the Geneva Conference earlier in the year.

Mr. M. Foot: Can the right hon. Gentleman say at what stage in the negotiations he will be putting forward the proposals concerning the safeguards asked for by the T.U.C. in its memorandum today? Can he give an undertaking that the specific proposals for the alteration of the Rome Treaty put forward by the T.U.C. will be put forward by him on behalf of this country?

Mr. Heath: I am grateful to the T.U.C. for putting forward this memorandum. As the House knows, we have been in contact with the T.U.C. throughout the course of these negotiations, and its advice has been most valuable. We are now giving full consideration to its memorandum, and its views will be taken into account in the negotiations.

Sir H. Legge-Bourke: While those who know the Minister of Labour will at once accept that the remarks attributed to him over the week end were probably made in a jocular rather than derogatory vein, will my right hon. Friend nevertheless bear in mind that a very unfortunate inference could be drawn from those remarks—not least the possibility that Her Majesty's Government may be considering flouting the views of the Commonwealth Prime Ministers, were they to advise us not to go in? Can my right hon. Friend assure us on that matter?

Mr. Heath: On a number of occasions my right hon. Friend the Prime Minister has given the House an assurance that the Commonwealth Prime Ministers, at the conference in September, will be able fully and frankly to express all their views, and that they will be taken fully into account by Her Majesty's Government.

Mr. Gaitskell: Is the right hon. Gentleman aware that it would be better not to try merely to shrug off the remarks of the Minister of Labour? Is he aware that if he wishes to avoid the charge which has been thrown at the Government that they are getting ready to sell the Commonwealth down the river, he should restrain his right hon. Friend from making speeches of this kind? May I suggest that he invites the Minister of Labour to make a statement—if these


remarks were not made seriously—in order to clear the matter up? The House of Commons is always prepared to be very generous to anybody who, in the heat of the moment—or the cool of the moment—has made an unfortunate remark. To leave the matter as it is is unsatisfactory.
I have two questions about the negotiations. First, has the stage now been reached, in negotiating with the Six, at which they are prepared to accept that no purely temporary arrangements will be satisfactory in respect of Commonwealth temperate food products, and that temporary arrangements will at any rate be continued unless and until world commodity agreements satisfactory to the Commonwealth countries are reached?
Secondly, is he expecting that, when the end of July comes and he produces his provisional outline of agreement, this will cover the point raised by my right hon. Friend the Member for Huyton (Mr. H. Wilson) about the voting rights in the Council of Ministers?

Mr. Heath: I will draw the attention of my right hon. Friend to the point which has been made by the right hon. Gentleman. For myself, I would say that throughout these negotiations in Brussels and in London, as we have been doing this past week, we have been literally in constant contact with Commonwealth representatives before each session and after each session.
We have now had the visit of the Prime Minister of Australia and of the Deputy Prime Minister of New Zealand and many other Commonwealth Ministers, and we are now looking forward to the visit of Mr. Desai, from India. I have on previous occasions paid tribute to the immense amount of help which

they have given us by providing information and also their views. We are immensely grateful to them for that.
On the point of the temperate foodstuffs, it is now agreed that there must be a transitional period up to 1970. [An HON. MEMBER: "That was always agreed."] No, that was not always agreed, but it is now agreed. Various proposals for dealing with this have also been put forward, some of them at the last meeting by the Six, but we have not yet reached agreement about the content of the transitional period.
It is also agreed that, in the event of worldwide arrangements not having been obtained, or not being practicable, there must be arrangements after the transitional period ends in 1970, to continue after that. This, also, we have discussed, but have not yet agreed the content with the Six, who themselves have put forward proposals.

Mr. Gaitskell: Is it not a fact that this alternative arrangement will have to be negotiated before we commit ourselves to going into the Common Market?

Mr. Heath: Yes, Sir. This is what we have been discussing during the last four days, and we are continuing to discuss it.
On the point of the voting rights, I think that it may be possible for us to deal with this matter before the outline is obtained.

BUSINESS OF THE HOUSE

Ordered,
That the Finance Bill, as amended, may be considered immediately after the re-committal of the Bill and report thereof, notwithstanding the practice of this House as to the interval between the stages of such a Bill.—[Mr. Iain Macleod.]

Orders of the Day — FINANCE BILL

Order for consideration, as amended, read.

Motion made, and Question proposed,
That the Bill be recommitted to a Committee of the whole House in respect of the Amendments to Clause 9, page 11, line 42; Clause 10, page 14, lines 3, 6 and 7; Clause 13, page 19, line 26, and page 20, lines 14 and 16; Clause 14, page 21, lines 15 and 18; and Clause 15, page 21, line 41, and page 22, lines 11 and 29; of the new Clauses (Extension of double taxation relief in respect of certain dividends) and (Taxation of Gas Council and Area Boards); and of the Amendments to Schedule 9, page 58, line 13, page 59, line 13, page 62, line 15, and page 63, line 42, standing on the Notice Paper in the name of the Chancellor of the Exchequer.—[Mr. Selwyn Lloyd.]

Question amended, by adding, at the end:
and in respect of the Amendments to Clause 9, page 10, lines 24 and 26, and Clause 10, page 12, line 46, and page 13, line 1, standing on the Notice Paper in the name of Mr. James Callaghan."—[Mr. Callaghan.]
and in respect of the Amendment to Clause 9, page 10, line 18, standing on the Notice Paper in the name of Mr. William Warbey".—[Mr. Warbey.]

and, as amended, agreed to.

Bill immediately considered in Committee.

[Sir WILLIAM ANSTRUTHER-GRAY in the Chair]

Clause 9.—(CHARGE TO INCOME TAX AND PROFITS TAX.)

4.6 p.m.

Mr. William Warbey: I beg to move, in page 10, line 18, to leave out "the acquisition or".
The effect of this Amendment would be that the relevant paragraph in Clause 9 would provide that tax shall not be chargeable by virtue of this Section where the disposal occurs before 10th day April, 1962. It is, therefore, aimed at focusing attention on the question at what point the gains realised from the sale of the assets become taxable. It is to focus attention on the date of disposal and not on the date of acquisition of the assets.
During our discussions in Committee, there was some debate on whether or not

the provisions of this Clause should be made retrospective, that is to say, whether or not an earlier datum line should be taken than the date on which the Bill was introduced by the Chancellor. The usual objections were raised to retrospective legislation, and I want to begin by meeting that possible argument, which the Government may produce against this Amendment, by saying quite definitely that this can only be regarded as retrospective legislation if we take a completely false view of what is intended by the raising of this tax.
It is perfectly true that the Chancellor of the Exchequer, in introducing this tax, described it as a speculative gains tax. Earlier, when the matter was discussed during the preceding months, he had given the impression that he was contemplating a capital gains tax, but when we came to the point we found that it had been reduced, in terminology at least, to a tax on speculation. This does not appear in the Finance Bill itself, and the Bill says nothing about speculation.
The rubric to Clause 9 says "Charge to income tax and profits tax", and subsection (1) of the Clause refers to tax on
gains accruing to any person resident and ordinarily resident for the year in the United Kingdom from his acquisition and disposal of any chargeable assets,
In other words, according to the Bill, it is a tax intended to apply to all gains made as a result of buying some shares or piece of property on a certain date and selling at a profit at some date later. It is not limited to speculation.
Therefore, we on this side of the Committee are quite entitled to argue, as we do argue here, that our aim is to turn this tax, which the Government have reduced to something insignificant, into a tax which would have real teeth in it, and would raise revenue for the Government, out of the activities of persons who engage in the buying and selling of property and who make profits or acquire gains out of so doing.
If one takes the limited, narrow view of the Government in this matter, it could be argued that it would be quite wrong to try to catch people who bought their shares or their property before 10th April, because we are concerned only with people who are deliberately


engaging in speculation. Deliberately to engage in speculation a person must know that he is doing so, and that the gain from the speculation is likely to be taxed. He must start the speculation after he is aware of these matters and terminate it at some later date within periods fixed in the Bill.
Hon. Members on this side of the Committee take the view that all capital gains are legitimate matters for taxation. I say this, Sir William, in case you may be inclined to consider that I am out of order. This is what is contained in the Bill. The implication is that all gains accruing from buying and selling property are, and should be, subject to taxation. The purpose of this Amendment is to make that intention effective, more effective than would be the case were the Government to proceed with their very limited proposals.
During the Committee stage we discussed the way in which the Government's proposals might be evaded. By this Amendment, and subsequent Opposition Amendments, we seek to try to bring into the net the large amount of money being made by people through the buying and selling of shares and property. With this money those persons can secure a share of the wealth produced by the community in the form of goods and services without doing anything whatever to earn that privilege. We are saying, in effect, that when a man buys a piece of land for £10,000 and, within two, three, or four years, sells it for £20,000, his profit of £10,000 represents an addition to his income which he may use as he wishes.
It is true that the money might be used for further investment. But, equally, it could be spent on a house, on furniture, or on the redecoration of his property. It might be used for purchasing television sets or washing machines. He might buy a yacht, or engage two or three gardeners, or domestic servants. He might use it to increase the amount spent by his wife on having her hair dressed. In other words, the man can do exactly the same with that money as other people might do with money that they had earned as a result of working. He could spend it in taking from the community goods and services produced by the community.
Therefore, we say that in this case there is a double argument in favour of taxation. Not only are people enabled to acquire an additional source of income by acting in this way, but what they do is tantamount to robbery; because they are taking goods and services from the community without doing any work or making any contribution to the welfare of the community.
4.15 p.m.
Having recognised that the general case for taxing capital gains, as such, is that they represent an unearned addition to income or wealth—these terms in this context are regarded as interchangeable —we must make such a tax effective. It becomes a question of the date and the length of time chosen for the operation of the tax. I think that it may readily be shown that if the Government resist this Amendment, far from being fair to people who buy and sell property at a profit, they will be very unfair. They will be discriminating between different types of people.
Take, again, the case of a man who buys a piece of land for £10,000. Under the proposals of the Government, if he buys it in March of this year and sells it next month he will not pay a penny in tax. Another person may buy a similar piece of land on 10th April of this year, and may sell it, not next month, but two years or two-and-a-half years later. He would have to pay a very heavy tax on the profit which he made. Surely such a proposal will cause unfair discrimination between different people doing essentially the same thing.
The effect of the Amendment would be to create fairness in the treatment of persons engaged in this form of activity. But, basically, our argument is that this should be an effective tax, and it may be made effective only if we bring into the net all those who sell property which they own at present, or which they have been holding during the past three months, six months, three years, ten years or twenty years. In other words, the matter should be approached from the point of view of the gain made at the time of the sale of the asset. Surely that is the relevant time to consider whether a profit has been made upon which it would be legitimate to impose a tax.
We know that buying and selling of shares and land has been going on to an extraordinary, indeed a scandalous, extent during the last two or three years. We gave illustrations of this during our earlier proceedings in Committee. I quote one illustration of the buying and selling of land which appeared in the Daily Mail on 21st June, 1961. Here are two examples of prices paid for land at Whitfield, three miles from Dover. Speculator No. 1 paid £7,000 for 20 acres of farmland and then spent twelve months getting permission to build. He sold the land bare for £21,000. Speculator No. 2 bought 20 acres, with planning permission, for £15,000 and resold it within six months for £28,000. Neither of those speculators did a pennyworth of productive work in connection with that land.
All they had to do was to negotiate through an agent for the purchase of the land and later to negotiate for its sale. I do not know whether the Chief Secretary regards that as a form of productive activity. I find it difficult to do so. I do not know whether he regards it as a form of investment. I do not know whether he regards it as promoting capital growth. It promotes capital growth if by capital growth one means personal wealth, paper value.

Sir John Barlow: The hon. Member seems to assume in all these cases that a profit is made, but we have heard of a great slump on the Stock Exchange about a month ago. Presumably some very large losses are made. Does he suggest that it is all one-sided?

Mr. Warbey: No, not in the least. Of course losses are made from time to time. There is provision in the Bill to take account of that fact. Therefore, when we are talking about raising money by this form of taxation we are, in fact, talking about profits. Although losses may be made at certain periods, nevertheless the general tendency is to make a profit. There is no denying that the secular tendency is for the value of property, particularly in a capitalist society such as ours, to increase in value without any addition of work or even thought on the part of the owners of that property.
It is true that these illustrations were taken from a year ago, but although, in recent weeks, the value of shares on the Stock Exchange has fallen, I have not heard that the value of land has fallen. I think that the hon. Member for Middleton and Prestwich (Sir J. Barlow) will find plenty of examples from a more recent period. He is likely to find them during the present and coming years so long as the Government remain in power, examples of quite fantastic increases in the price at which land is sold.
I come back to the point that this is something which has taken place in the recent past and that in the recent past people have bought land with a view to selling it within the next six months, twelve months or two or three years, at a very substantial profit. The question is whether we are to apply the tax only to people who bought land on or after 10th April, 1962, and who sell it within the next three years or to apply the tax to people who already held land on 10th April and who sell it within the given period.
That is all there is between the two sides of the Committee on this question. It is merely a question fundamentally of whether we recognise or not that it is merely speculation which should be discouraged and is a fit matter for taxation or the acquisition of unearned wealth at the expense of the community. The question is whether that should also be taxed. That is the real issue and the basis on which I move the Amendment.

Mr. John Diamond: I support the Amendment, but I wonder whether it makes the matter absolutely clear. This is a difficult thing from which we all suffer, particularly back benchers, that an Amendment we put forward may not cover exactly everything we have in mind. As I see it, the effect of the Amendment would be merely to leave out the date on which the acquisition and the tax arises and let the matter be open. The Amendment does not say precisely from what date we should calculate the profit or loss.
I am hoping that it will make the task of my hon. Friend in persuading the Government to accept the Amendment a little more easy if I interpret the Amendment in my way. The way in which I


would interpret it is as meaning that whereas it is not right that anyone should be called upon to pay tax retrospectively where no warning has been given—this is quite different from the case we all have in mind where a warning was given—it is, nevertheless, quite unnecessary to give people enormous warning in advance of when the tax is to come into effect.
If a person who has land or shares at the given date, 10th April, it is quite unnecessary to say, "You shall not pay any tax on the profit or not be allowed any claim on the loss when those shares or land are sold no matter how long or short is the time after the date that transaction took place". It is quite unnecessary to go so far as that. It might be quite wrong to say, "Although you have bought these assets without any knowledge of this tax coming into operation you are now to be called upon to pay tax on the profit which accrued prior to the speech of the Chancellor of the Exchequer".
Although it may be wrong to go as far back as that, it surely cannot be wrong to say, "You pay tax on all assets of this kind which you sell within the prescribed period after the Act comes into effect and the amount of tax shall be calculated on the profit which accrues during the currency of this Act." That cannot be retrospective in any degree whatever. Therefore, we say that a person who has bought shares three months before the beginning of the Act and sells them 2·9 months after the inception of the Act and is, therefore, caught by the Act, should pay tax on the profit made. I admit that it would be an unusual share transaction to make a profit in those untypical circumstances, but it may be a person with no knowledge of investment on the Stock Exchange and one, therefore, likely to make a profit.
It is quite wrong to say, "You shall pay tax because we have a capital gains tax which is in force and you have made a profit while the Act has been in force. You have made a profit from 10th April onwards." All that is required is to value the asset at 10th April and provide, in cases Where it cannot be valued at 10th April, for the assumption that the increase or decrease has taken place retrospectively over the period between

the purchase of the sale or the asset. That is not very difficult. This is the kind of thing which has to be done time and time again. With stocks which are publicly quoted it is perfectly easy to find the quotation on 10th April, the middle quotation and the quotation at close of business on that day, or on whatever date is chosen.
With land, it is not quite so easy, but it is likely to be thoroughly equitable to say in regard to land as to which the inception of the Act was half-way through the period between the purchase and the sale that the owner must assume half the profit or loss, whichever it be, which accrued prior to the Act coming into force and the other half afterwards.
To that extent, if that is a possible interpretation of the Amendment, the Government could certainly accept it. In a sense there would be no question of retrospection, and it would be giving effect even to this miserable little provision of paying tax only in certain very restricted circumstances instead of omitting a large portion of the tax which might have been collected if the Government had intended fully to bring it into effect.

4.30 p.m.

Mr. J. T. Price: Without any apology, and for a very simple reason, I must support the Amendment. The simple reason is that already under taxation conventions other forms of property which are not liable to tax prior to a change being agreed by the House of Commons may ultimately have to pay that tax if the Statute so requires. I particularly have in mind those goods which are subject to Excise duties of various kinds and which may be held as stock and working capital by various businesses. They may be carrying only a small tax in one year, but if, later, the tax is increased the holders of these goods are still required to pay the tax, even if it were not regarded by the House as a retrospective imposition.
We have argued about this on many occasions and everybody knows that it is only like a reluctant dragon or a reluctant debutante that the right hon. and learned Gentleman and his hon. Friends were driven to bring into the Bill this miserable apology for a capital gains tax. It is only an apology for one, and it is hedged around by all kinds of


escape hatches through which those who are clever enough can avoid paying at all. I will not make a long speech, but I could continue at length if I was so minded. I am concerned most not about the fluctuations on the Stock Exchange, which at the moment are downwards—and it is about time that they were. Surely the Stock Exchange has gone mad and has driven the right hon. and hon. Gentlemen administering the Treasury almost into a similar state of imbecility with all the repercussions of Stock Exchange transactions.
At the moment the Stock Exchange is taking a downward turn and will not produce very much on a margin of capital gains until the racket gets in full swing once more, but what cannot be denied is the far more sinister effect on the economy and the people of land speculation. The most fantastic capital gains have been made by clever speculators in obtaining access to land due for a development certificate for housing or businesses purposes. I cannot see how it can be claimed that speculators who have been fortunate enough or ingenious enough or unscrupulous enough—I do not wish to be unfair even to them—to acquire large parcels of land in the close proximity of urban areas needed for development should be covered by a special provision that if the land was acquired before 10th April, 1962, then their large capital gain should go scot-free.
We all make abstract statements, but I have no wish to be abstract in this matter, and I will take the situation in the part of Lancashire which I have the honour to represent. There are parcels of land in my division which, ten years ago, after I came to the House, I could have bought for £30 an acre if I had been a speculator. I refer to marginal land, rather poor land, near a large town. As soon as it gets a development certificate it is sold on an option under the hammer, or by all kinds of private treaties, for over £3,000 an acre.
In other words, the price of land has increased one hundred times in ten years in the part of Lancashire which I represent. This cannot be justified by any kind of clever economic argument, or any of those phrases so dear to the hearts of economists and politicians. The right

hon. Gentleman is not usually forthcoming when he gets his heels well dug in, but I appeal to him to be forthcoming on this occasion.

Mr. Charles Loughlin: My hon. Friend is wasting his time if the right hon. Gentleman has his heels dug in.

Mr. Price: I am an optimist, and I always hope for the best even from the Government Front Bench. Sometimes we get even them to see things. But as a matter of common sense and natural justice between one citizen and another, we cannot justify allowing land speculators to go scot-free under the Bill. I apologise for having spoken rather longer than I intended and I appeal to the Minister to give serious consideration to the very modest Amendment which my hon. Friend the Member for Ashfield (Mr. Warbey) moved.

The Chief Secretary to the Treasury and Paymaster-General (Mr. Henry Brooke): In his concluding words the hon. Member for Westhoughton (Mr. J. T. Price) seemed to expect that I was not likely to accept the Amendment, and on behalf of my right hon. and learned Friend the dragon debutante I am bound to say that I could not advise the Committee to accept it.
The hon. Member for Ashfield (Mr. Warbey), in his interesting speech, managed to hitch on to this seemingly small Amendment a full exposure of his own personal argument for a thoroughgoing capital gains tax, and in his enthusiasm for it he quoted a number of examples which certainly would not have been caught by his own Amendment.
At this stage I do not think that I need go over again all the arguments which have been developed by the Chancellor and other Treasury Ministers about the necessity for enacting this as a short-term gains tax, making such short-term gains subject to Income Tax and Surtax, as distinct from a thorough-going capital gains tax such as the hon. Member desires. As far as I am aware, no country makes long-term gains subject to Income Tax and Surtax or the local equivalent as though the profit were ordinary income.
In framing his Budget and his Finance Bill, my right hon. and learned Friend was clear in his mind that he did not intend to introduce any element of retrospection into this new tax and that is why this subsection is drafted as it is and excludes from liability to tax the profit on the disposal of any asset which was acquired before Budget day. If that were altered as the Amendment seeks to alter it, then in the Chancellor's view that would involve a retrospective element—and he has set his face against that.
In passing, the hon. Member for Gloucester (Mr. Diamond) delivered a persuasive speech seeking to get the Committee to agree to a different Amendment from that on the Notice Paper. He said, charmingly, that if the right interpretation of the Amendment were his interpretation, then he was in favour of it, but the legal officers at the Government's disposal, at any rate, differ in their interpretation from that which he sought to put on it, and I am sure that he will forgive me if I stick to the subject of the Amendment as it stands and do not deal with his more ingenious version.

Mr. Diamond: The right hon. Gentleman would no doubt wish to say whether the Government would consider it to be retrospective if tax were charged only on the profit which has accrued since Budget Day.

Mr. Brooke: The hon. Gentleman will forgive me if I avoid getting out of order and address myself to the Amendment which is on the Notice Paper and not to other Amendments which might have been tabled.

Mr. Loughlin: Will the right hon. Gentleman deal with this subtlety of retrospection? When Purchase Tax is increased the Government cannot recover the increased Purchase Tax from people who hold stocks of goods which they bought at the lower price. That is an element of retrospection based upon the right hon. Gentleman's interpretation in this case.

Mr. Brooke: Sir William, I do not think that you would allow me to deal with that at length, but I can certainly say, in passing, that before the hon. Gentleman entered the House a Committee examined that question on behalf

of the Government of the day and reported that there was no means of dealing with the apparent anomalies or unfairness which might arise when Purchase Tax was changed, so putting a paper profit into the pockets of those who hold goods or imposing a paper loss on them.
But I must deal with the Amendment on the Notice Paper. I must say simply that the Government are not prepared to make this short-term gains tax apply in the case of any asset acquired before Budget day. There is a further point which was not dealt with in any of the speeches commending the Amendment to the Committee. My right hon. and learned Friend having made his Budget speech and the Finance Bill having been published, people who had acquired assets which might in other circumstances have been chargeable assets under Case VII will unquestionably have acted on the basis that the Chancellor of the Exchequer did not intend to change the law retrospectively. Therefore, during the last couple of months or so they may well have sold assets which, if the Amendment were accepted, would be taxable.
That would be wholly unfair to them because, had they had any previous knowledge that the Budget might be radically altered and that an Amendment like this might subsequently be written into the Bill, they would have had the choice of holding the assets for a longer period and avoiding tax on them. The hon. Member cannot escape from the clear charge of retrospection which would be levelled against him if he were successful in having the Amendment made to the Bill.

Mr. Warbey: Will the right hon. Gentleman deal with the case of the person who, having read the extensive report in the Press of the Chancellor's intention, having read the Chancellor's own much earlier warning that he was contemplating the possibility of introducing some kind of gains tax, and having anticipated, again on the basis of very well informed speculation, that the Chancellor was likely to fix Budget day as the date from which the tax should operate, hastened the acquisition of a parcel of land by a few days in order to buy it before 10th April rather than after 10th April? Surely


that person, by a little intelligent anticipation, will, under the Chancellor's proposals, benefit very substantially, as opposed to the man who waited until after Budget day to decide what to do?

Mr. Brooke: Whether he will benefit very substantially will depend in part on the course of the markets. I can think of very few assets which he could have acquired just before Budget day which he would now be able to sell at a substantial profit. The hon. Gentleman is quite incorrect in assuming that anybody from reading the papers or picking up bits of information before the Budget could have had any clear idea of what the Chancellor intended. The papers published immediately after Budget day contained statements to the effect that the Chancellor in his Budget had confounded many prognostications as to the form which this tax would take.
I return to what I said at the beginning, because this is a relatively narrow point. My right hon. and learned Friend is not prepared to amend the Bill to introduce an element of retrospection which was not there when the Bill was first presented to Parliament. That is all I have to say in resisting the Amendment.

4.45 p.m.

Mr. G. R. Mitchison: There is no element of retrospection in the Amendment. The Amendment does not seek to alter either of the two limiting periods. All it does is to remove the necessity of the acquisition having happened before Budget day. The right hon. Gentleman is the greatest authority in the House of Commons on questions of retrospection. It was he who gave what most of us thought was full and explicit warning of the golden handshake. When this was acted on by the Chancellor of the Exchequer of the day, and a Bill was introduced to give effect to what the right hon. Gentleman had warned us the Government would do, the Government could not stand up to their own back benchers and the Bill was amended accordingly. I would not for one moment deny that the right hon. Gentleman knows all about it, but he has in this case got the picture wrong.
There is one instance so simple that it provides the complete answer. The Bill contains elsewhere a proposal to

alter death duties. Is that proposal to be limited to the property which was held at the date when the proposal came into effect or when the Money Resolutions were passed? Death duties have never been regarded as retrospective, and they are not retrospective. What must be looked at is the date when the tax falls to be paid, and if the falling to be paid arises out of something which was complete at a period before the proposal was introduced I agree that it is retrospection, but certainly not if that something had only begun, for instance, in the case of death duties, during life.
In a property-owning democracy I suppose that the property-owning habits of many people begin at some much earlier period than their death. There is no logical distinction between the two cases. In this case it is a tax which falls on disposal, related, it is true, to acquisition. In the case of death duties it is a tax which falls at the death of a man, related to property which he may have held for long or short periods beforehand.
When that sort of argument is advanced as the only argument which the Government adduce for rejecting the rather limited Amendment, I begin to wonder why they are doing it. I start by wondering why the Chancellor of the Exchequer "leaked" to the extent he did before the Budget. This was not to forewarn people. We are told that it was not. What was the object of it? Why did he do it? I should have thought that he did it because he had made it perfectly clear that he intended to tax what are called in this Bill short-term gains. They have certainly been so described by the Government.
At an earlier stage we introduced a much more sweeping Amendment to extend this tax to other capital gains. That does not arise on this Amendment. The two limiting periods are still there. The period of six months applies to everything except land. Budget day was in April and we are now in July. A substantial part of the six months has already elapsed.
What we have to consider is the case of disposals for a period that cannot possibly exceed about four months in that case, and about two years and eight or ten months in relation to land. We have to consider a very limited class of transactions.
In Committee, the right hon. Gentleman was discussing the broader Amendment and said:
I think that the Chancellor is right in saying that it is land held for a period of less than about three years and stocks and shares held for a period of less than about six months which are the normal subjects of speculation. I am certainly not saying that every sale that takes place within such a period is a sale following a purchase which was made with speculative intent."—[OFFICIAL REPORT, 22nd May, 1962; Vol. 660. c. 263.]
There is certainly not a word in the Bill about motive or speculative intent, not even as such in connection with hobby farming. All we have to consider is land held for a period of less than about three years and stocks and shares held for a period of less than about six months. It is those things that we are taxing; why should we fail to tax them because they were acquired before the Budget? Is there any possible logical difference between the two?
There is no retrospection about it. What is happening is that the Government, for a purely illogical reason—and I really cannot understand their motive —are trying to exempt from tax one particular group of this class of what I shall call land or stocks held for a short period. If the class is to be taxed, why exempt this group? As the right hon. Gentleman himself said, there is in all this no question of speculative intent. We are simply dealing with something which, for perfectly good reasons, deserves to be taxed. It represents taxable capacity, and it is, in fact, the equivalent of income in the hands of the recipient, as we all know perfectly well. That is what we are getting at here.
Stocks bought a day or two before the Budget statement and sold a month or two months later are exactly the same as the others; there is taxable capacity, and income in the hands of the recipient. Why should a person be exempted from being taxed on what he received—what we treat, for these purposes, as income —simply because income happens to accrue to him at a particular date, depending on the date of the Budget speech? There is no logical distinction

whatever between now taxing, say, stocks and shares held for six months and bought just before the Budget and stocks and shares held for six months and bought just after the Budget. To say there is an element of retrospection in that indicates either a sad lack of logic in the minds of Treasury Ministers, or, as I think, a shortage of any other reason for objecting to the Amendment.

The right hon. Gentleman made what I think is the most preposterous statement I have ever heard of the relations between Government and Parliament. He said that we must not alter the Finance Bill now because people may have acted on what the Government put forward at any earlier stage. We all know that the Government are likely to win—they have a majority, and they probably will—but that is a very bad reason for resisting any change in the Finance Bill.

What actually happens is that, after a certain amount of pressure, the Chancellor of the day, one day or another, succumbs. For instance, he brings in an Amendment about blind persons, or something like that, which, very often, he has rejected stoutly in the earlier stages of the same Bill. It is constant pressure on the Government that is valuable, and all that we are trying to do in this instance is something very short and simple; to try to persuade the Government to be moderately logical, and not to make the wholly illogical distinction they have made by the language of the Clause.

For those reasons, on this small issue, and in order to try to knock a modicum of sense into Treasury Ministers, we propose to divide the Committee. In doing so, we have no feeling whatever that we are doing any hardship to the world outside. Why discriminate illogically in favour of those making large gains on their dealings in stocks and shares and then try to defend it on the ground that anything else would be retrospection?

Question put, That "the acquisition or" stand part of the Clause:—

The Committee divided: Ayes 230, Noes 161.

Division No. 222]
AYES
[4.56 p.m.


Agnew, Sir Peter
Atkins, Humphrey
Barlow, Sir John


Amrey, Rt. Hon. Julian
Balniel, Lord
Barter, John


Arbuthnot, John
Barber, Anthony
Batsford, Brian




Beamish, Col. Sir Tufton
Harvey, John (Walthamstow, E.)
Pott, Percivall


Bell, Ronald
Harvie Anderson, Miss
Powell, Rt. Hon. J. Enoch


Bidgood, John C.
Hastings, Stephen
Price, David (Eastleigh)


Biffen, John
Heald, Rt. Hon. Sir Lionel
Prior, J. M. L.


Biggs-Davison, John
Hicks Beach, Maj. W.
Profumo, Rt. Hon. John


Birch, Rt. Hon. Nigel
Hiley, Joseph
Proudfoot, Wilfred


Bishop, F. P.
Hill, d. E. B. (S. Norfolk)
Pym, Francis


Black, Sir Cyril
Hirst, Geoffrey
Quennell, Miss J. M.


Bossom, Clive
Hocking, Philip N.
Rawlinson, Peter


Bourne-Arton, A.
Holland, Philip
Redmayne, Rt. Hon. Martin


Bowen, Roderic (Cardigan)
Hollingworth, John
Rees, Hugh


Boyle, Sir Edward
Hopkins, Alan
Renton, David


Brewis, John
Hornby, R. P.
Ridley, Hon. Nicholas


Brooke, Rt. Hon. Henry
Hughes Hallett, Vice-Admiral John
Ridsdale, Julian


Brown, Alan (Tottenham)
Hughes-Young, Michael
Robertson, sir D. (C'thn's &amp; S'th'ld)


Browne, Percy (Torrington)
Hulbert, Sir Norman
Robinson, Rt. Hn. Sir R. (B'pool, S.)


Bullus, Wing Commander Eric
Iremonger, T. L.
Robson Brown, Sir William


Burden, F. A.
Jackson, John
Rodgers, John (Sevenoaks)


Butcher, Sir Herbert
James, David
Roots, William


Campbell, Sir David (Belfast, S.)
Jenkins, Robert (Dulwich)
Royle, Anthony (Richmond, Surrey)


Carr, Compton (Barons Court)
Jennings, J. C.
Sandys, Rt. Hon. Duncan


Carr, Robert (Mitcham)
Johnson, Dr. Donald (Carlisle)
Scott-Hopkins, James


Cary, Sir Robert
Johnson, Eric (Blackley)
Seymour, Leslie


Chataway, Christopher
Kerans, Cdr. J. S.
Sharpies, Richard


Chichester-Clark, R.
Kerby, Capt. Henry
Shaw, M.


Clark, William (Nottingham, S.)
Kershaw, Anthony
Skeet, T. H. H.


Clarke, Brig. Terence (Portsmth, W.)
Kirk, Peter
Smithers, Peter


Cleaver, Leonard
Lagden, Godfrey
Stanley, Hon. Richard


Cole, Norman
Legge-Bourke, Sir Harry
Stevens, Geoffrey


Collard, Richard
Lewis, Kenneth (Rutland)
Steward, Harold (Stockport, S.)


Cooper-Key, Sir Neill
Linstead, Sir Hugh
Storey, Sir Samuel


Cordeaux, Lt.-Col. J. K.
Litchtield, Capt. John
Studholme, Sir Henry


Cordle, John
Lloyd, Rt. Hon. Selwyn (Wirral)
Summers, Sir Spencer


Costain, A. P.
Longbottom, Charles
Talbot, John E.


Crawley, A. M.
Longden, Gilbert
Tapsell, Peter


Critchley, Julian
Loveys, Walter H.
Taylor, Edwin (Bolton, E.)


Crowder, F. P.
Lubbock, Eric
Taylor, W. J. (Bradford, N.)


Curran, Charles
Lucas-Tooth, Sir Hugh
Teeling, Sir William


d'Avigdor-Goldsmid, Sir Henry
McAdden, Sir Stephen
Temple, John M.


Deedes, W F
McLaren, Martin
Thatcher, Mrs. Margaret


de Ferranti, Basil
Maclean,SirFitzroy(Bute&amp;N.Ayrs.)
Thomas, Leslie (Canterbury)


Digby, Simon Wingfield
McLean, Neil (Inverness)
Thomas, Peter (Conway)


Donaldson, Cmdr. C. E. M.
Macleod, Rt. Hn. Iain (Enfield, W.)
Thompson, Richard (Croydon. S.)


Doughty, Charles
MacLeod, John (Ross &amp; Cromarty)
Thornton-Ketnstey, Sir Colin


Drayson, G. B.
McMaster, Stanley R.
Thorpe, Jeremy


Duncan, Sir James
Macmillan, Maurice (Halifax)
Touche, Rt. Hon. Sir Gordon


Eccles, Rt. Hon. Sir David
Macpherson, Wall (Dumfries)
Turner, Colin


Eden, John
Maltland, Sir John
Turton, Rt. Hon. Sir Gordon


Eillot, Capt. Walter (Carshalton)
Manningham-Buller, Rt. Hn. Sir R.
Tweedsmuir, Lady


Emmet, Hon. Mrs. Evelyn
Marlowe, Anthony
van Straubenzee. W. R.


Errington, Sir Eric
Marshall, Douglas
Vane, W. M. F.


Erroll, Rt. Hon. F. J.
Marten, Neil
Vaughan-Morgan, Rt. Hon. Sir John


Farey-Jones, F. W.
Mathew, Robert (Honiton)
Vickers, Miss Joan


Farr, John
Matthews, Cordon (Meriden)
Wakefield, Sir Waveil


Fell, Anthony
Mawby, Ray
Walder, David


Finlay, Graeme
Maxwell-Hyslop, R. J.
Walker Peter


Fisher, Nigel
Maydon, Lt.-Cmdr. S. L. C.
Walker-Smith, Rt. Hon. Sir Derek


Fraser, Ian (Plymouth, Sutton)
Moore, Sir Thomas (Ayr)
Wall, Patrick


Gammans, Lady
Nabarro, Gerald
Ward, Dame Irene


Gardner, Edward
Neave, Airey
Watkinson Rt Holt Harold


Glover, Sir Douglas
Nicholson, Sir Godfrey
Webster, David


Glyn, Dr. Alan (Clapham)
Noble, Michael
Williams, Dudley (Exeter)


Goodhart, Phillip
Nugent, Rt. Hon. Sir Richard
Williams, Paul (Sunderland, S.)


Goodhew, Victor
Oakshott, Sir Hendrie
Wills, Sir Gerald (Bridgwater)


Gough, Frederick
Orr, Capt. L. P. S.
Wilson, Geoffrey (Truro)


Gower, Raymond
Osborn, John (Hallam)
Wise, A. R.


Green, Alan
Page, Graham (Crosby)
Wolrige-Gordon, Patrick


Gresham Cooke, R.
Page, John (Harrow, West)
Woodhouse, C. M.


Grimond, Rt. Hon. J.
Pannell, Norman (Kirkdale)
Woodnutt, Mark


Grosvenor, Lt.-Col. R. G.
Pearson, Frank (Clitheroe)
Woollam, John


Gurden, Harold
Percival, Ian
Worsley, Marcus


Hall, John (Wycombe)
Peyton, John



Harris, Frederic (Croydon, N.W.)
Pickthorn, Sir Kenneth
TELLERS FOR THE AYES:


Harrison, Brian (Maldon)
Pitman, Sir James
Mr. Gordon Campbell and


Harvey, Sir Arthur Vere (Macclesf'd)
Pitt, Miss Edith
Mr. Michael Hamilton.




NOES


Ainsley, William
Bennett, J. (Glasgow, Bridgeton)
Braddock, Mrs. E. M.


Allaun, Frank (Salford, E.)
Benson, Sir George
Bray, J. W.


Allen, Scholefield (Crewe)
Blackburn, F.
Brockway, A. Fenner


Awbery, Stan
Blyton, William
Butler, Herbert (Hackney, C.)


Bacon, Miss Alice
Bowden, Rt. Hn. H. W. (Leics. S.W.)
Callaghan, James


Baxter, William (Stirlingshire, W.)
Bowles, Frank
Castle, Mrs, Barbara


Bence, Cyril
Boyden, James
Chapman, Donald







Cliffe, Michael
Hynd, H. (Accrington)
Probert, Arthur


Collick, Percy
Hynd, John (Attercliffe)
Proctor, W. T.


Craddock, George (Bradford, S.)
Irving, Sydney (Dartford)
Pursey, Cmdr. Harry


Cronin, John
Janner, Sir Barnett
Randall, Harry


Crosland, Anthony
Jay, Rt. Hon. Douglas
Rankin, John


Cullen, Mrs. Alice
Jeger, George
Redhead, E. C.


Darling, George
Jenkins, Roy (Stechford)
Reid, William


Davies, G. Elfed (Rhondda, E.)
Johnson, Carol (Lewisham, S.)
Roberts, Albert (Normanton)


Davies, Ifor (Gower)
Jones, Dan (Burnley)
Robertson, John (Paisley)


Deer, George
Jones, Elwyn (West Ham, S.)
Robinson, Kenneth (St. Pancras, N.)


Delargy, Hugh
Key, Rt. Hon. C. W.
Rodgers, W. T. (Stockton)


Diamond, John
King, Dr. Horace
Ross, William


Dodds, Norman
Lee, Frederick (Newton)
Royle, Charles (Salford, West)


Driberg, Tom
Lewis, Arthur (West Ham, N.)
Shinwell, Rt. Hon. E.


Dugdale, Rt. Hon. John
Lipton, Marcus
Silverman, Sydney (Nelson)


Ede, Rt. Hon. C.
Loughlin, Charles
Slater, Joseph (Sedgefield)


Edwards, Rt, Hon. Ness (Caerphilly)
Mabon, Dr. J. Dickson
Small, William


Edwards, Robert (Bilston)
MacDermot, Niall
Sorensen, R. W.


Edwards, Walter (Stepney)
McKay, John (Wallsend)
Soskice, Rt. Hon. Sir Frank


Evans, Albert
McLeavy, Frank
Spriggs, Leslie


Fitch, Alan
MacPhereon, Malcolm (Stirling)
Stewart, Michael (Fulham)


Foot, Dingle (Ipswich)
Mallalleu, E. L. (Brigg)
Stones, William


Foot, Michael (Ebbw Vale)
Manuel, Archie
Strauss Rt. Hn. G. R. (Vauxhall)


Fraser, Thomas (Hamilton)
Mapp, Charles
Stross,Dr.Barnett(Stoke-on-Trent,C.)


Gaitskell, Rt. Hon. Hugh
Marsh, Richard
Swingler, Stephen


Galpern, Sir Myer
Mason, Roy
Taverne, D.


Ginsburg, David
Mendelson, J. J.
Taylor, Bernard (Mansfield)


Gordon Walker, Rt. Hon. P. C.
Millan, Bruce
Thompson, Dr. Alan (Dunfermline)


Gourlay, Harry
Mllne, Edward
Thomson, G, M. (Dundee, E.)


Greenwood, Anthony
Mitchison, G. R.
Tomney, Frank


Grey, Charles
Monslow, Walter
Warbey, William


Griffiths, David (Rother Valley)
Morris, John
Weitzman, David


Griffiths, W. (Exchange)
Moyle, Arthur
Wells, Percy (Faversham)


Hale, Leslie (Oldham, W.)
Neal, Harold
Wells, William (Walsall, N.)


Hall, Rt. Hn. Glenvil (Colne Valley)
Noel-Baker, Francis (Swindon)
Wilkins, W. A.


Hamilton, William (West Fife)
Noel-Baker,Rt.Hn.Philip(Derby,S.)
Willey, Frederick


Hannan, William
Oram, A. E.
Williams, D. J. (Neath)


Harper, Joseph
Owen, Will
Williams, LI. (Abertillery)


Hayman, F. H.
Paget, R. T.
Williams, W. R. (Openshaw)


Healey, Denis
Pannell, Charles (Leeds, W.)
Williams, W. T. (Warrington)


Henderson,Rt.Hn.Arthur(Rwly Regis)
Parkin, B. T.
Willis, E. G. (Edinburgh, E.)


Herbison, Miss Margaret
Paton, John
Wilson, Rt. Hon. Harold (Huyton)


Hilton, A. V.
Pavitt, Laurence
Winterbottom, R. E.


Holman, Percy
Pearson, Arthur (Pontypridd)
Woof, Robert


Houghton, Douglas
Peart, Frederick
Wyatt, Woodrow


Hughes, Emrys (S. Ayrshire)
Pentland, Norman



Hunter, A. E.
Prentice, R. E.
TELLERS FOR THE NOES:



Price, J. T. (Westhoughton)
Mr. Rogers and Mr. Lawson

5.0 p.m.

Mr. Mitchison: I beg to move, in page 10, line 24, to leave out "three" and insert "five".

The Chairman: I think that it would he convenient for the Committee to discuss with this Amendment that in line 26, to leave out "six months" and to insert "two years".

Mr. Mitchison: That will be convenient, Sir William.
The first Amendment is designed to lengthen by two years the period over which land must be held before its disposal ceases to attract the capital gains tax, or whatever I should call it. "Speculative gains tax" is, perhaps, a better phrase. The next Amendment is a corresponding provision seeking to end large the period for other things, for example stocks and shares, from six months to two years.
I would he the first to admit—as. I think, the Government have admitted—

that there is a bit of a hit and miss application in these periods. There is bound to be. It is perfectly logical to introduce a capital gains tax with no period at all or, at any rate, a very long one. But when trying to arrive at short periods for a purpose which is not particularly clear or well defined, the periods one arrives at may differ considerably with different people.
I seek to look at what the Government really have in mind. They have rejected, I think rightly, the idea that one should put in anything about the intentions of the person who is buying or selling. It may be a tax about speculative gains but there is not a word in the Bill, as I read it, about intention. The result to be achieved, therefore, depends entirely on the period chosen.
As I understand from what has been said on behalf of the Government, these are the periods where they think that


most speculation would take place—periods to which they would consider that normal speculation, if I might use such a phrase, would occur and periods which will cover a certain number of cases without any speculative intention at all while, in the majority of cases, there will be an element of speculation. That is what I understand the Clause to be directed at.
It seems that six months, taking this period first, is a ridiculously short one for the purpose the Government have in mind. I should have thought that people who speculate on the Stock Exchange, for example, carry on a very in-and-out business and buy and sell in the process of an account. There are for later discussion Amendments designed to deal with this type of transaction. Many people buy shares and the like intending to hold on to them not for an indefinitely long period, but certainly for something likely to exceed six months. These people are likely to resell them and are not, on the whole, intending to keep them as something on the income of which they will depend for the rest of their lives or for many years.
I cannot imagine who thought up the period of six months, or why. I cannot see why as short a period as that can possibly be appropriate. This is a matter of individual judgment and common sense. I do not know whether there are any statistics available to show how long people habitually hold on to shares. Did the Chancellor use such statistics in arriving at the period of six months? I do not think that anything was said on Second Reading or in Committee as to why six months should be selected.
It may be that this was just a part of the Chancellor's intuition. After all, did not one of his predecessors see a pigeon on a ledge outside his residence and derive from it an imaginative conclusion that was subsequently embodied in that year's Budget? It was, I think, Lord Amory. It may be that when this lucky bird arrived it said to the right hon. and learned Gentleman the Chancellor, "Six months. That is it."
I do not know what pigeons do as between Chancellors of the Exchequer and themselves, but that is the only sort of reason that I can think of. It may

be that they drew it out of a hat in the Treasury. "Ernie" is rather bulky to use for this purpose, but they may have asked him to fix the period. Really, on any sensible showing, surely six months is much too short a period.
I agree that in the practical circumstances of today it is right that there should be some distinction between land and other cases. When we come to land, it seems even clearer that three years is too short a period. Indeed, I feel doubtful whether we have been anything like thorough-going enough, assuming the general purpose of the Clause to be the Government's intention, to seek to add a couple of years. There are elements of holding land, building on it, developing it, things happening around it, the growth of the neighbourhood, this or that particular public enterprise, a new road, the development of a new estate, and so on, which make me think that even the average speculator would in most cases be likely to hold on for a considerably longer period than three years. But we have suggested five years, and five it is for the moment.
I cannot see why the Government should object to these extensions. Who will be penalised by them? Clearly, not the person who holds property for a very long time and lives on the proceeds or the income from it. In periods of this kind there must be really short-term gains in any strict sense of the word, and I should have thought that this kind of extension was reasonable and in accordance with common sense and practice.
I go one step further. The Chancellor has always been unable to tell us what, if any, receipts he expected to accrue from this tax. For all we know, it may be just waving of the flag without any accompanying army of tax collectors at all. It may he a mere gesture designed to satisfy the very deep public feeling that there is something wrong with all this and that there ought to be a tax on gains of this sort. That is quite a general feeling which the Chancellor has himself recognised and has, I think, supported in principle.
If that is what the right hon. and learned Gentleman has in mind, I suggest to him that general public opinion would certainly not regard six months as sufficient in the case of stocks and shares


or three years as sufficient in the case of land. People who felt that there was something wrong here would be more convinced than ever that the Bill contained no serious attempt to put it right if the present very short periods were adhered to.
I will not take up the time of the Committee by discussing the wider question of whether there ought not to be a capital gains tax in the proper sense of the word, whether, in short, this kind of thing really serves any useful purpose. It certainly serves none of the purposes which a proper capital gains tax ought to serve. I accept for the purposes of this discussion, and for no other purposes, the Government's view of what the tax is intended to do, but like the Irish, having accepted it, I should like to know what it is. I have not yet discovered on what grounds these very short periods were put into the Bill originally.
No doubt we shall be told today what we have not so far discovered, whether it came from the oracular pigeon or from the sheer bright light of the right hon. and learned Gentleman's intuition or perhaps from some more detailed and possibly sounder considerations which, no doubt, the right hon. and learned Gentleman will now explain to us.

5.15 p.m.

Mr. Anthony Crosland: Although I support what my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has said, I do not think he is right about the pigeon being the source. I think it must have been an elephant. One thing that is known about elephants is that, as opposed to most human beings, their gestation period is six months, and I assume that this must be where the six months came from. [HON. MEMBERS: "Two years."] I think the two years is the gestation period of a rhinoceros.
I wish to put this serious question to the Chancellor of the Exchequer who has had something like two months in which to think about the tax and the period of six months. Does not the right hon. and learned Gentleman think that at the moment he is possibly getting the worst of both worlds on this very short six months period? On the one hand, it has been said by a number of

commentators during the Stock Exchange slump recently that one of the destabilising influences on the Stock Exchange has been this tax. It has been argued in the Financial Times and other papers that but for this impending tax there would have been more speculation on the Stock Exchange. I do not know whether this is true or not. One cannot tell what volume of business there would have been had this tax not existed.
Does the Chancellor take the view that most of us take, that an extension of the slump on the Stock Exchange would have dangerous consequences to the economy and would possibly have dangerous consequences to the level of consumer spending and would also affect that mysterious matter of confidence? In the United States, the fear that the Stock Exchange slump can have an effect on consumer spending is widely held on Wall Street.
It would be interesting to know whether the Chancellor of the Exchequer has any similar fears concerning the Stock Exchange slump in this country and whether he thinks that this very short-term tax has been the factor which has destabilised the market in the last few weeks and has led the volume of business to fall more catastrophically than it would have done had we not had the tax. I should like to know whether the Chancellor subscribes to these fears, because it seems to me that if they have any substance, then, on the one hand, the right hon. and learned Gentleman has introduced a tax which has had a bad influence on the market and one which, nevertheless, is not going to bring in any revenue at all. It simply has an adverse effect on the amount of short-term speculation—restricts it—and, on the other hand, brings in no yield of any kind. It is possible, therefore, that in the kind of mixed economy system which we run now we shall get the worst of both worlds. We shall create a less efficient market and shall not get any yield from the tax.
Even though a comprehensive capital gains tax might be criticised on these benches—and let us suppose that the criticism can be substantiated—we, on the other hand, would say that because the tax brought in a very good yield it had good side-effects. But to bring in a


tax which has a bad effect on the market and does not produce any yield is, as I say, to get the worst of both worlds. It is not clear what the exercise is supposed to do. Of course, one concedes that when the Chancellor introduced the tax he did so on a genuine, honest basis. One had a sense of what the right hon. and learned Gentleman had in mind. But we are not talking about that now; we are talking two months afterwards of what has happened in the last few weeks and what the consequence of this short-term capital gains tax has been.
I should like the Chief Secretary when he replies—and I am not making this as a party debating point—to say now, two months later, whether he is not prepared to admit that the tax on the one hand has a bad effect on the "perfect functioning of the capital market"—which I put in inverted commas because I am slightly sceptical about the perfect functioning of a capital market—while on the other hand bringing in no compensating benefit of producing a yield which might have a good effect on the distribution of income and on the trade union attitude when it comes to wage bargaining.
If the Chief Secretary cannot answer this question in the sense of saying yes, he is still convinced that this short-term tax avoidance brings about the disadvantages that I have mentioned, the sensible thing from his point of view would be, even at this late stage, to convert this heavily criticised notion of the very short-term gains tax to a longer-term gains tax, even though he had then to make the rates lower than they are in the short-term case.

Mr. H. Brooke: This matter of the appropriate length of period for short-term sales of both land and other assets was discussed at an earlier stage of the proceedings, and I seek to make the Government's view clear again. There obviously can be argument as to what is exactly the right period. The hon. and learned Member for Kettering (Mr. Mitohison) said that there was a good deal of hit-and-miss about it. That may be so, but I think that broadly speaking the Government have hit the target and the opposition have missed it.
The hon. and learned Gentleman said that the period of six months for stocks and shares and commodities other than land was ridiculously short. On the other hand, if one looks around one finds that it is six months in Federal Germany. That is the period there for a similar tax. I am not saying that the way that my right hon. and learned Friend the Chancellor of the Exchequer arrived at these periods of six months and three years was simply to look abroad and copy, because that it not so. In any case, the legislation for this country ought to be framed for this country's needs and not by transference from any other territory. I simply quote that case of Federal Germany as evidence to refute the hon. and learned Gentleman's allegation that the period of six months is ridiculous.
I think we must bear in mind the whole time that we are dealing here with a gains tax which is not like, for example, the American gains tax. This is a tax which imposes on profits from short-terms gains the full rigour of tax on income. The gains, if they are taxable under Case VII, will be subject to Income Tax and Surtax as though they were ordinary income, and that is so because it is the Government's assertion and belief that such gains are commonly spent as income, whereas it is equally the Government's belief that gains which accrue after longer periods are, in general, regarded by the owner or the recipient as profits on investment that will be available for reinvestment rather than as income which will be available for immediate spending.
Let me say at once that I cannot defend the period of six months or any other period as precisely and absolutely correct. There obviously could be argument as to whether it should be five, seven, or eight months. But I am prepared to say that the period of two years which is embodied in one of the Amendments is too long, and if hon. Members will give their minds to this I think they will feel that a capital gain which is secured after the stock or share has been held for up to two years really will not be likely to be regarded as year-by-year income.
As the hon. and learned Gentleman rightly said, conceptions of motive are kept out of the wording of this Bill.


Motive does not enter in, and we all know that there may be sales within six months or within three years which are not the winding up of a speculative transaction at all. Similarly, I grant that there may be sales beyond the period of six months or three years which really are the completion of a transaction which had a speculative intent. But the view of the Government is that those two period's which are in the Bill broadly correspond to the dividing line in time between the probably speculative transaction and the transaction which was probably the sale of a genuine investment.
I remember when we discussed this in Committee that there was some reference to Amendments which would have gone further than these two. There was the Amendment which suggested ten years as a period for the sale of land and five years for other assets. If I remember rightly, that Amendment which was put on the Paper by an hon. Member opposite was described by the hon. Member for Cardiff, South-East (Mr. Callaghan) as "wishy-washy." We now have an Amendment which goes not quite so far as that and which has his support. It may be washy without being wishy, or vice versa. But I did not quite understand why he had so vigorously condemned the longer periods proposed by one of his hon. Friends in Committee and was now himself setting his name to this Amendment. It may be that it is because one cannot have absolute certainty in the matter, and that I grant.
I do not think that the hon. and learned Gentleman is correct in saying that the ordinary speculative transaction in land is likely to take more than three years between acquisition and disposal. Most of the cases that have been quoted here today and in earlier proceedings about speculative land profits have related to periods much shorter than three years. I think that both with regard to land and stocks and shares the periods that have been mentioned in the Bill will, broadly speaking, catch that type of transaction which my right hon. and learned Friend is aiming to catch.

Mr. Mitchison: I should like to know how the Government arrived at these figures. Apparently it was not a pigeon. It was not Federal Germany. What was

it? Were there any statistics or information available that we could share in, or was it simply a matter of intuition?

Mr. Brooke: It was not a pigeon, nor a stool-pigeon. It was not Federal Germany, nor any other country. It was a judgment which we believe to have been correct. Nor do I think that one could prove the rightness of the figures in the Bill or in this Amendment by any statistical process. I think one just has to take a realistic judgment and try to think out for oneself what is the length of period for the completion of transactions where the profit is likely to be regarded as ordinary income, and what is the length of period where the completion of the transaction will be the sale of a genuine investment and, therefore, the proceeds of that sale will be treated as capital and not as income.
5.30 p.m.
This has been widely discussed in the Press for the last two or three months, and there has been very little serious expression of opinion diverging from the Government's figures. It is my business to read pretty well all the Press comments on the Budget and the Finance Bill. Though there have been expressions of opinion, the prevailing view undoubtedly has been that the Government have these periods about right.

Mr. James Callaghan: Right for whom?

Mr. Brooke: For the public. What the Government have to consider is the interests of the public.

Mr. Callaghan: The right hon. Gentleman talks about the interests of the public. What he means is that he is about right in the interests of the speculators who know that if they hold on to securities for six months and a day they will not have to pay tax. The interests of the speculators are not the interests of the public, although the Conservative Party thinks that they are.

Mr. Brooke: If speculators hold on to assets for two years and a day, under the Amendment they will likewise escape tax. That argument can always be used with regard to any figure.
The hon. Member for Grimsby (Mr. Crosland) put questions to the Government


about the possible ill-effects of a short-term gains tax on the stock market. I have had a word or two on the Front Bench with my right hon. and learned Friend the Chancellor of the Exchequer. He is inclined to disbelieve that the tax which he proposed in his Budget has had any appreciable effect on what has happened on the stock market since then. Obviously this is a matter of discussion which the economic historians of posterity may judge. I believe that the hon. Member for Grimsby would himself say that it is too early to give an authoritative answer to this question, but I think that many of us are inclined to believe that economists in the past have over-rated the steadying effect of speculators on the market. That again is a matter of judgment, but I certainly would not rest a case in favour of the speculator on that argument.
I agree with the hon. Member for Grimsby that one could have a long debate about the perfect functioning of the capital market and indeed about what is meant by the word "perfect" when one uses that phrase, but I can answer at short notice that the Chancellor, for his part, does not believe that the existence of this tax has had any perceptible effect on what has happened on the stock market.
I come back now to the main Amendment. I said in Committee that the Government have selected these periods of six months and three years as broadly the periods which will distinguish the speculative transaction from the genuine investment transaction. None of us can be absolutely right about this, but I think that we should carry the country with us in arguing that the periods of six months and three years which are in the Bill are much more realistic than the periods of two years and five years which are in the Amendments. On that account the Government cannot accept these Amendments.

Mr. Cyril Bence: I am not a financier. I never really understand the intricacies of this extraordinary financial mechanism but I have always understood that there was something scientific in arriving at financial decisions and something scientific in the development of fiscal

policies. Yet the right hon. Gentleman the Chief Secretary to the Treasury has told the Committee that when the Chancellor arrived at these two figures he did not get them from Federal Germany or from a pigeon in a pigeonhole in Whitehall or from an elephant.
The right hon. Gentleman has no evidence and no statistics. How in the name of fortune did he arrive at a judgment that periods of six months and three years were right without any evidence to enable him to make that judgment? This reminds one of watching a farce in which the judge is asleep while all the evidence is being given and he then sums up. Here we have the Treasury, acting as a judge, summing up, and coming to a decision which the right hon. Gentleman makes irrevocable because he is not prepared to accept an Amendment, and yet he will not or cannot tell the Committee on what basis of statistics or evidence he has arrived at this important judgment.
I was trained as an engineer. When we engineers take a decision we can always tell people the reasons why we have decided to make one thing one size and another thing another size. We always have our reasons, but here in the Mother of Parliaments the representative of the Treasury tells the Committee that the Chancellor has come to a decision without any evidence or statistics. The right hon. Gentleman just does not know why the decision was made. The Chancellor did not get the idea from Federal Germany. He did not get it from any pigeon in Trafalgar Square or in Whitehall. He did not get it from an elephant and he did not get it from a rhinoceros.
There is evidence from chambers of commerce and the Stock Exchange that the majority of speculators will escape if they retain the holding for just over six months. There is evidence also about land holdings. [Interruption.] Does the hon. Member for Kidderminster (Mr. Nabarro) want to intervene?

Mr. Gerald Nabarro: Poor stuff.

Mr. Bence: It may be. I am a layman. I have never claimed the tremendous perspicacity, the knowledge, and the influence over the Treasury which the hon. Member has exercised


through all the years he has been a Member of Parliament, but surely I am entitled as an ordinary Member to ask the Chief Secretary to give a fuller explanation of how these figures were determined. It is not good enough to tell us that he cannot give the source of his evidence or to give us the impression that he does not know of any evidence. If the right hon. Gentleman explained how these figures were arrived at and I found that his arguments and the evidence were convincing and realistic I might go into the Lobby on the right hon. Gentleman's side, but I certainly cannot support a proposition which has not been justified by any evidence. When someone puts a proposition to me and I find that it cannot be justified by any evidence, I reject it.

Dr. Alan Thompson: The debate has revolved around what is admittedly a difficult question, the distinction between long-term and short-term gains and losses. It has been argued for many years that the two come into different economic categories, that short-term capital gains are, properly regarded, not capital gains at all but a species of speculative profit and, as such, should come in with ordinary income.
In my view, the distinction which we have been trying to make between longterm and short-term gains comes back, at the end of the day, to the investor's control. The investor himself has discretionary control over the timing of gains and losses. This is why we want to expand the categories in order to catch as much as we can. Whatever one may say about objective long-term market influences and so on, the man who makes the decisions is the investor himself.
American experience has shown, according to Professor Seltzer's book, which, I am sure, many hon. Members who have taken a special interest in capital gains have read, that the shorter period discriminates against the lower income groups. According to his thesis, people in different income groups vary in their practice and the intervals at which they realise their gains or take their losses. It has been found that the richer members of the community hold on to their profits longer. On the other hand, they take their losses more

quickly, winding up a losing venture much more quickly than people in the lower income groups who also invest on the Stock Exchange. I suggest that this is something which the Chancellor should consider.
When we debated this matter previously, I said that a capital gains tax or a land tax must always rate high on grounds of equality of sacrifice and rather low on difficulties of administration. Our Amendments would give those who administer the tax more elbow room and ease their task, at the same time tending more towards what we regard as equality of sacrifice. Behind this proposal, we must always remember that there are some people who escape their share of the country's tax burden while others paying tax on different kinds of income are discriminated against.
There is little to add on the subject of land and the outrageous rise in property prices except, perhaps, to point out again that, in regard to land, a much larger fraction of property capital gains as distinct from security capital gains accrues to professional dealers and companies. Again, this is the American experience. In dealing with property, capital gains in land as distinct from gains on the Stock Exchange, one is much more in the milieu of the professional dealer or speculator.
It is sometimes argued that a capital gains tax might diminish the supply of risk capital. I have myself never believed this, and moreover, if there is provision for losses as well as gains, the argument seems to be wiped out. Whatever may be said about the effect of the tax on the supply of risk capital, however, the tax certainly cannot affect the supply of land because the supply of land is fixed. Admittedly, its use can be varied, but in any given area the supply is fixed and there can be no argument that a tax will in any way stop or inhibit the proper use and development of land.
In recent years, the shocking rise in land prices has hindered all forms of public development, slum clearance and so forth, and it has made all the tasks of local authorities and the central Government almost impossible. It has forced councils to slow down or stop building houses even though they still


have long waiting lists. It has hindered us from modernising our road system, especially inside towns. We do not see our Amendments as a complete answer to the problem of speculation in land. We have our own policies and proposals into which this would be dovetailed, with a reversion to emphasis on the use of land for the public good and much stricter control over its use. We consider that our Amendment would do something to limit what we regard as the anti-social market forces which have taken over in land speculation so ruthlessly in recent years.

5.45 p.m.

Mr. Peter Tapsell: I wish to revert to the point made by the hon. Member for Grimsby (Mr. Crosland) about the possible effect of the speculative gains tax on the working of the stock market. I must declare an interest here because I am a member of the London Stock Exchange. I thought that the point made by the hon. Gentleman, which the Chief Secretary rejected, had a good deal of force in it. In conversation with me, many of those who work in the Stock Exchange, and have had many years of experience there, have expressed the opinion that this tax has had a considerable effect upon the market recently and that, over a long period, it will lead, as it has on Wall Street, to an accentuation of fluctuations, both up and dawn, which is hardly likely to be desirable.
It stands to reason that in a falling market buyers are less likely to come in if, should the market continue to fall, they will lose their money, while if, on the other hand, their judgment is right and the market goes up and they happen to be Surtax payers, almost all their profit will be taken away from them. Conversely, a rising market, for the same reason, it is unlikely that holders of shares which are rising rapidly will be quick to sell.
Therefore, one of the effects of the tax, which I have none the less supported and will continue to support, on social grounds, is likely to be that we shall have greater fluctuations in the stock market than before. I think that this is undesirable and it will to some extent create a more speculative situation than otherwise. So often, when one interferes

with the free market mechanism, one produces results opposite to those which one is seeking to secure.
Several of my colleagues on the London Stock Exchange with a great deal of experience in these matters take the view that in the long run the effect of the speculative gains tax may be to reduce the turnover by about 25 per cent. If this happens, it will probably sound the death-knell of the jobbing system as we have known it in this country because the jobbing system, which is already in considerable difficulties, depends on turnover. If turnover falls considerably, the system will break down and we shall see ourselves moving over to something like the American specialist system which experience has shown to be less satisfactory than our own.
For those two rather technical reasons, which nevertheless have some national importance, I hope that my right hon. and learned Friend will keep an open mind on the matter. I hope that he will watch the working in practice of this speculative gains tax on the London Stock Exchange and the other stock exchanges which play a great part in the raising of capital in this country. If he finds that the market mechanism is being seriously damaged and that no tax yield of any significance is forthcoming, I hope that he will keep an open mind and, perhaps, look at the matter again in future years.

Mr. Callaghan: I think that the hon. Member for Nottingham, West (Mr. Tapsell) and my hon. Friend the Member for Grimsby (Mr. Crosland) have raised some points which the Chancellor and the Chief Secretary should keep in mind. I say frankly that I cannot assess what the value of a jobber is. He operates on the London Stock Exchange but not on other stock exchanges. Whether they are the better or the worse for that, I do not know. I agree with the hon. Gentleman to this extent, that if the jobber's occupation is to be wiped out it should be wiped out not as a sort of by-product or side-result of this tax but deliberately because it is fulfilling no useful social function. If that is so, I am quite happy to see the jobbers go. On the other hand, I do not think that they should go merely as a result of


the operation of this tax. The hon. Gentleman made a very heavy attack on the speculative gains tax. The only reasons which he could find to support it were social. I have shown him that even those are nugatory.
As I understand it, there were three reasons for introducing the tax. We have had different reasons advanced at different times. The first was to raise revenue, the second was social and the third was to prevent speculation in order to put a rather prettier face on what is happening in the City of London and elsewhere to which the wage earners take very great exception. Each of these three reasons has been advanced at one time or another. We still do not know the main ground on which the Government rely. All that I can say is that all of these reasons are ineffective.
Some of my hon. Friends who have spoken have done the Chancellor of the Exchequer the injustice of taking him seriously. This is not a serious tax. It is not seriously meant. It will have no serious results. It is merely a bit of camouflage which was announced on 26th July last year, at the same time as the pay pause was announced, to persuade the nurses to continue to accept under-payment because the Government were going to deal with the tycoons in the City of London. That was the purpose. That was the origin of the tax.
To assume that this is a serious tax for the purpose of raising revenue is to take the Chancellor of the Exchequer much more seriously than he takes himself. The Chief Secretary let the cat out of the bag when he said that no one in the City of London really disagrees with what is being done. Of course not. The financiers in the City know that this tax will not hurt them. It does not affect them. It has no effect of any major consequence in raising revenue or in convincing the P.A.Y.E. taxpayers that there is justice as between them and the speculators. Therefore, it does not have the social effect which the hon. Gentleman hoped that it would have, and he might as well withdraw his support on that ground. There is a great deal of cynicism about the consequences of this miserable little tax when it is

discussed in trade union branches because everyone recognises that it will not raise any revenue. It is doing the maximum damage and is of the minimum usefulness.
The purpose of this Amendment is to try to convert this tax into something which will yield some revenue. I do not think that it would have social consequences if we did that because the amount of revenue which it would yield would not be sufficiently great. But I have always regarded this as a useful revenue-raising device and I therefore support my hon. and learned Friend the Member for Kettering (Mr. Mitchison) in trying to extend the period in which the tax should operate.
If the Amendments were accepted, we should probably have to go on to consider the rates chargeable because I do not think it possible to charge the full rate of Income Tax or Surtax on a long-term basis. I would want to see it adjusted in a downward direction. For the Chief Secretary to say that, because I described the proposition as wishy-washy in Committee, I am not entitled to support this Amendment is reducing the Committee to the level of a charade. The Government turned us down on the last Amendment. We therefore put forward a more modest Amendment hoping that the Government would accept it, but they turned that down, too.
I hope that the Chief Secretary will raise the level of his argument. He has spoken twice this afternoon. It is the first time that he has told us that retrospection means that nothing can be done if a transaction has not already taken place—a very new definition of retrospection. The truth is that the Government have not a case in this matter. I have been long enough in the House of Commons to know that the Government yield not to argument but to pressure. They have yielded to pressure on this occasion—the pressure of Lord Ritchie and his friends. All that matters is that Lord Ritchie and his friends are satisfied about this. If it is not to them that the Government has yielded, then, as the hon. Member for Kidderminster (Mr. Nabarro) said sotto voce, it is the 1922 Committee to which they have yielded.

Mr. Nabarro: Who said that?

Mr. Callaghan: The hon. Gentleman did.

Mr. Nabarro: What I said was that the hon. Gentleman evidently had forgotten that there was a 1922 Committee, which is an entirely different thing.

Mr. Callaghan: I do not know what difference the hon Gentleman wants us to assume, but that is not what he said. He said that the Chancellor had yielded to the 1922 Committee.

Mr. Nabarro: I did not say that.

Mr. Callaghan: The hon. Gentleman is a sufficiently good controversialist not to have to get out of an argument in which he has been defeated by denying that he has used it. He should be able to find a better reply. I am ready to accept that, if it was not to Lord Ritchie to whom the Chancellor yielded, it was the 1922 Committee.

Mr. Tapsell: At least the hon. Gentleman will agree that Lord Ritchie's friends are singularly ungrateful to the Government for the arrangement reached.

Mr. Callaghan: I am not sure. If this were a serious tax, we should have had more serious Amendments this afternoon. I have yet to see the City of London under-represented on the benches opposite. The fact that there have been so few Amendments and that there is so little discussion on this Amendment is evidence to me that the City of London could not care less about this tax because they intend to avoid it by carrying on precisely in the way that they have always done.
As I have said, very little revenue will result from this tax. If I had to make a forecast it would be that if the Chancellor thinks that he can get away with it he will repeal it before the life of the Government is at an end. If he does not, it will at least provide some foundation for constructing a proper capital gains tax which will be equitable to the public in the truest sense of the word—that capital gains which accrue to those who do not earn them should yield some revenue to the public purse for the relief of those who need it. That is the basis on which I stand, and we have moved the Amendment to try to achieve that basis.

Although this tax is a miserable, farcical affair, the Chancellor has opened the sluice gates just a little, which will enable us to construct a proper taxation system in the long run. Perhaps he will be remembered as the author of a capital gains tax even though he did it by accident, by default, and never really wanted to do it.

Sir Alexander Spearman: The hon. Member for Cardiff, South-East (Mr. Callaghan) under-estimates the social advantages. Perhaps we do not mean exactly the same thing by "social advantages".
I accept that this tax is not likely to raise much revenue, that it will make for greater fluctuations in prices, will imperil the position of the jobbers, and will narrow the market for stocks and thereby adversely affect great institutions, like the great insurance companies.
On the social side, I think that there is quite a strong feeling of bitterness on the part of people in industry, and, indeed, in the City of London, who feel that, although they are working hard and solidly, they are sometimes making much less than someone who has made a gain over a very short time. An official of one of the biggest private banks in the City was very much in favour of the tax for that reason. He said that great difficulty was being caused among his staff—he has a very large staff—in that those who were working hard at research and at the proper business of investment were getting smaller rewards than some of their colleagues who were tempted to waste their time making short-term profits. However, he emphasised that that applied only to the very short-term speculator. It does not apply in the same way to the man who makes a profit by his investment over a long period. That is where the bitterness is created. The tax will certainly help in that respect. I am sure, therefore, that the hon. Member for Cardiff, South-East vastly under-estimated the social advantages.

Question put, That "three" stand part of the Clause:—

The Committee divided: Ayes 240, Noes 178.

Division No. 223.]
AYES
[5.59 p.m.


Agnew, Sir Peter
Atkins, Humphrey
Barlow, Sir John


Arbuthnot, John
Balniel, Lord
Barter, John


Ashton, Sit Hubert
Barber, Anthony
Batsford, Brain




Beamish, Col. Sir Tufton
Harrison, Brian (Maldon)
Pannell, Norman (Kirkdale)


Bell, Ronald
Harvey, Sir Arthur Vere (Macclesf'd)
Pearson, Frank (Clitheroe)


Bennett, F. M. (Torquay)
Harvey, John (Walthamstow, E.)
Percival, Ian


Bidgood, John C.
Harvie Anderson, Miss
Peyton, John


Biffen, John
Hastings, Stephen
Pickthorn, Sir Kenneth


Biggs-Davison, John
Hay, John
Pitman, Sir James


Birch, Rt. Hon. Nigel
Heald, Rt. Hon. Sir Lionel
Pott, Percivall


Bishop, F. P.
Henderson, John (Cathcart)
Powell, Rt. Hon. J. Enoch


Black, Sir Cyril
Hendry, Forbes
Price, David (Eastleigh)


Bossom, Clive
Hicks Beach, Maj. W.
Prior, J. M. L.


Bourne-Arton, A.
Hiley, Joseph
Profumo, Rt. Hon. John


Boyle, Sir Edward
Hill, Dr. Rt. Hon. Charles (Luton)
Proudfoot, Wilfred


Brewis, John
Hill, J. E. B. (S. Norfolk)
Pym, Francis


Brooke, Rt. Hon. Henry
Hirst, Geoffrey
Quennell, Miss J. M.


Brown, Alan (Tottenham)
Hocking, Philip N.
Rawlinson, Peter


Browne, Percy (Torrington)
Holland, Philip
Redmayne, Rt. Hon. Martin


Buck, Antony
Hollingworth, John
Rees, Hugh


Bullus, Wing Commander Erie
Hopkins, Alan
Renton, David


Burden, F. A,
Hornby, R. P.
Ridley, Hon. Nicholas


Butcher, Sir Herbert
Hughes Hallett, Vice-Admiral John
Ridsdale, Julian


Campbell, Sir David (Belfast, S.)
Hughes-Young, Michael
Robertson, Sir D. (C'thn's &amp; S'th'ld)


Campbell, Gordon (Moray &amp; Nairn)
Hulbert, Sir Norman
Robinson, Rt. Hn. Sir R. (B'pool, S.)


Carr, Compton (Barons Court)
Iremonger, T. L.
Robson Brown, Sir William


Carr, Robert (Mitcham)
Irvine, Bryant Godman (Rye)
Rodgers, John (Sevenoaks)


Cary, Sir Robert
Jackson, John
Roots, William


Chataway, Christopher
James, David
Royle, Anthony (Richmond, Surrey)


Chichester-Clark, R.
Jenkins, Robert (Dulwich)
Scott-Hopkins, James


Cleaver, Leonard
Jennings, J. C.
Seymour, Leslie


Cole, Norman
Johnson, Dr. Donald (Carlisle)
Sharples, Richard


Collard, Richard
Johnson, Eric (Blackley)
Shaw, M.


Cooke, Robert
Kerans, Cdr. J. S.
Shepherd, William


Cooper, A. E.
Kerby, Capt. Henry
Skeet, T. H. H.


Cooper-Key, Sir Neill
Kershaw, Anthony
Smith, Dudley (Br'ntfd &amp; Chiswick)


Cordeaux, Lt.-Col. J. K.
Kirk, Peter
Smithers, Peter


Cordle, John
Lagden, Godfrey
Spearman, Sir Alexander


Costain, A. P.
Lancaster, Col. C. G.
Stanley, Hon. Richard


Crawley, A. M.
Legge-Bourke, Sir Harry
Stevens, Geoffrey


Critchley, Julian
Lewis, Kenneth (Rutland)
Steward, Harold (Stockport, S.)


Crowder, F. P.
Linstead, Sir Hugh
Stoddart-Scott, Col. Sir Malcolm


Curran, Charles
Litchfield, Capt. John
Storey, Sir Samuel


Dance, James
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)
Studholme, Sir Henry


d'Avigdor-Goldsmid, Sir Henry
Lloyd, Rt. Hon. Selwyn (Wirral)
Summers, Sir Spencer


Deedes, W. F.
Longbottom, Charles
Talbot, John E.


de Ferranti, Basil
Longden, Gilbert
Tapsell, Peter


Digby, Simon Wingfield
Loveys, Walter H.
Taylor, Edwin (Bolton, E.)


Donaldson, Cmdr. C. E. M.
Lucas, Sir Jocelyn
Teeling, Sir William


Doughty, Charles
Lucas-Tooth, Sir Hugh
Temple, John M.


Drayson, G. B.
McAdden, Sir Stephen
Thatcher, Mrs. Margaret


du Cann, Edward
Maclean, Sir Fitzroy(Bute&amp;N.Ayrs.)
Thomas, Leslie (Canterbury)


Duncan, Sir James
Macleod, Rt. Hn. Iain (Enfield, W.)
Thompson, Richard (Croydon, S.)


Eccles, Rt. Hon. Sir David
MacLeod, John (Ross &amp; Cromarty)
Thornton-Kemsley, Sir Colin


Eden, John
McMaster, Stanley R.
Touche, Rt. Hon. Sir Gordon


Elliot, Capt. Walter (Carshalton)
Macmillan, Maurice (Halifax)
Turner, Colin


Emery, Peter
Macpherson, Niall (Dumfries)
Turton, Rt. Hon. R. H.


Emmett, Hon. Mrs. Evelyn
Maddan, Martin
Tweedsmulr, Lady


Errington, Sir Eric
Maginnis, John E.
Vane, W. M. F.


Erroll, Rt. Hon. F. J.
Maitland, Sir John
Vaugtian-Morgan, Rt. Hon. Sir John


Farey-Jones, F. W.
Manningham-Buller, Rt. Hn. Sir R.
Vickers, Miss Joan


Farr, John
Marlowe, Anthony
Wakefield, Sir Wavell


Fell, Anthony
Marshall, Douglas
Walder, David


Finlay, Graeme
Marten, Nell
Walker, Peter


Fisher, Nigel
Mathew, Robert (Honiton)
Walker-Smith, Rt. Hon. Sir Derek


Forrest, George
Matthews, Gordon (Meriden)
Wall, Patrick


Franer, Ian (Plymouth, Sutton)
Mawby, Ray
Ward, Dame Irene


Gammans, Lady
Maxwell-Hyslop, R. J.
Webster, David


Gardner, Edward
Maydon, Lt.-Cmdr. S. L. C.
Williams, Dudley (Exeter)


Glover, Sir Douglas
Mills, Stratton
Williams, Paul (Sunderland, S.)


Glyn, Dr. Alan (Clapham)
Mott-Radclyffe, Sir Charles
Wills, Sir Gerald (Bridgwater)


Goodhart, Philip
Nabarro, Gerald
Wilson, Geoffrey (Truro)


Goodhew, Victor
Neave, Alrey
Wise, A. R.


Gough, Frederick
Nicholson, Sir Godfrey
Wolrige-Gordon, Patrick


Gower, Raymond
Noble, Michael
Woodhouse, C. M.


Green, Alan
Nugent, Rt. Hon. Sir Richard
Woodnutt, Mark


Gresham Cooke, R.
Oakshott, Sir Hendrie
Woollam, John


Grosvenor, Lt.-Col. R. G.
Orr, Capt. L. P. S.
Worsley, Marcus


Gurden, Harold
Osborn, John (Hallam)



Hall, John (Wycombe)
Page, Graham (Crosby)
TELLERS FOR THE AYES:


Harris, Frederic (Croydon, N.W.)
Page, John (Harrow, West)
Mr. Michael Hamilton and




Mr. McLaren.




NOES


Alnsley, William
Bacon, Miss Alice
Benson, Sir George


Allaun, Frank (Salford, E.)
Baxter, William (Stirlingshire, W.)
Blackburn, F.


Allen, Scholefield (Crewe)
Bence, Cyril
Blyton, William


Awbery, Stan
Bennett, J. (Glasgow, Bridgeton)
Bowden, Rt. Hn. H.W. (Leics, S.W.)







Bowen, Roderic (Cardigan)
Houghton, Douglas
Peart, Frederick


Bowles, Frank
Howell, Charles A. (Perry Barr)
Pentland, Norman


Boyden, James
Hughes, Emrya (S. Ayrshire)
Prentice, R. E.


Braddock, Mrs. E. M.
Hughes, Hector (Aberdeen, N.)
Price, J. T. (Westhoughton)


Bray, Dr. Jeremy
Hunter, A. E.
Probert, Arthur


Brockway, A. Fenner
Hynd, H. (Accrington)
Proctor, W. T.


Butler, Herbert (Hackney, C.)
Hynd, John (Attercliffe)
Pursey, Cmdr. Harry


Callagnan, James
Irving, Syndey (Dartford)
Randall, Harry


Cattle, Mrs. Barbara
Janner, Sir Barnett
Rankin, John


Chapman, Donald
Jay, Rt. Hon. Douglas
Reid, William


Cliffe, Michael
Jeger, George
Roberts, Albert (Normanton)


Collick, Percy
Jenkins, Roy (Stechford)
Robertson, John (Paisley)


Craddock, George (Bradford, S.)
Johnson, Carol (Lewisham, S.)
Robinson, Kenneth (St. Pancras, N.)


Cronin, John
Jones, Dan (Burnley)
Rodgers, W. T. (Stockton)


Crosland, Anthony
Jones, Elwyn (West Ham, S.)
Rogers, G. H. R. (Kensington, N.)


Crossman, R. H. S.
Jones, J. Idwal (Wrexham)
Ross, William


Cullen, Mrs. Alice
Jones, T. W. (Merioneth)
Royle, Charles (Salford, West)


Davies, G. Elfed (Rhondda, E.)
Key, Rt. Hon. C. W.
Shinwell, Rt. Hon. E.


Davies, Ifor (Gower)
King, Dr. Horace
Silverman, Julius (Aston)


Deer, George
Lawson, George
Silverman, Sydney (Nelson)


Delargy, Hugh
Lee, Frederick (Newton)
Skeffington, Arthur


Diamond, John
Lever L. M. (Ardwick)
Slater, Joseph (Sedgefield)


Dodds, Norman
Lewis, Arthur (West Ham, N.)
Small, William


Driberg, Tom
Lipton, Marcus
Smith, Ellis (Stoke, S.)


Dugdale, Rt. Hon. John
Loughlin, Charles
Sorensen, R. W.


Ede, Rt. Hon. C.
Lubbock, Eric
Soskice, Rt. Hon. Sir Frank


Edwards, Rt. Hon. Ness (Caerphilly)
Mabon, Dr. J. Dickson
Spriggs, Leslie


Edwards, Robert (Bilston)
MacDermot, Niall
Stewart, Michael (Fulham)


Edwards, Walter (Stepney)
McKay, John (Wallsend)
Stones, William


Evans, Albert
McLeavy, Frank
Stross,Dr.Barnett(Stoke-on-Trent,C.)


Fitch, Alan
MacPherson, Malcolm (Stirling)
Swingler, Stephen


Fletcher, Eric
Mallalieu, E. L. (Brigg)
Taverne, D.


Foot, Dingle (Ipswich)
Manuel, Archie
Taylor, Bernard (Mansfield)


Foot, Michael (Ebbw Vale)
Mapp, Charles
Thompson, Dr. Alan (Dunfermline)


Fraser, Thomas (Hamilton)
Marsh, Richard
Thorpe, Jeremy


Gaitskell, Rt. Hon. Hugh
Mason, Roy
Tomney, Frank


Galpern, Sir Myer
Mendelson, J. J.
Wade, Donald


Glnsburg, David
Millan, Bruce
Warbey, William


Gordon Walker, Rt. Hon. P. C.
Milne, Edward
Weltzman, David


Gourlay, Harry
Mitchison, G. R.
Wells, Percy (Faversham)


Greenwood, Anthony
Monslow, Walter
Wells, William (Walsall, N.)


Grey, Charles
Morris, John
White, Mrs. Eirene


Griffiths, David (Rother Valley)
Moyle, Arthur
Wilkins, W. A.


Griffiths, W. (Exchange)
Mulley, Frederick
Willey, Frederick


Grimond, Rt. Hon. J.
Neal, Harold
Williams, D. J. (Neath)


Hale, Leslie (Oldham, W.)
Noel-Baker, Francis (Swindon)
Williams, LI. (Abertillery)


Hall, Rt. Hn. Glenvil (Colne Valley)
Noel-Baker,Rt.Hn.Phillp(Derby, S.)
Williams, W. R. (Openshaw)


Hamilton, William (West Fife)
Oliver, G. H.
Williams, W. T. (Warrington)


Hannan, William
Oram, A. E.
Willis, E. F. (Edinburgh, E.)


Harper, Joseph
Owen, Will
Wilson, Rt. Hon. Harold (Huyton)


Hayman, F. H.
Paget, R. T.
Winterbottom, R. E.


Healey, Denis
Pannell, Charles (Leeds, W.)
Woof, Robert


Henderson,Rt.Hn.Arthur(RwlyRegis)
Pargiter, G. A.
Wyatt, Woodrow


Herbison, Miss Margaret
Paton, John
Yates, Victor (Ladywood)


Hilton, A. V.
Pavitt, Laurence



Holman, Percy
Pearson, Arthur (Pontypridd)
TELLERS FOR THE NOES:




Dr. Broughton and Mr. Redhead.

Mr. Barber: I beg to move, in page 11, line 42, at the end to insert:
or would be so brought into account apart from subsection (5) of section forty-two of the Finance Act, 1938 (which relates to payments between associated companies).
The Amendment corrects a technical flaw in subsection (7) of Clause 9, which provides for the charging of profits tax on short-term gains. Under paragraph (a) of the subsection which it is sought to amend the gains and losses to be taken into account in computing the profits of a trade or business for Profits Tax purposes—[Interruption.]

The Chairman: Order. It is impossible to hear what is being said.

Mr. Barber: I am grateful to you, Sir William.
As I was saying, the gains and losses to be taken into account are those accruing from the disposal of assets:
where income arising from the assets to the person making the disposal would be brought into account as a receipt in computing the profits … of the trade or business.
I explained at some length when we considered the Clause earlier in Committee that the provision took this form in order to meet the case of, for example, a local authority which is charged to Profits Tax only on the income of its trading undertakings. The effect of section 42 (5) of the Finance Act, 1938, which is referred to in the Amendment, was, unfortunately, overlooked when the Clause was drafted.
To put it very briefly, the subsection provides that where any interest, annuity, rent or royalty is payable by a company resident in the United Kingdom to another company and both companies are members of the same group of companies, the payment is not to be deducted in computing the profits of the paying company and is not to be included in computing the profits of the recipient company. Clearly, this provision should not of itself preclude a charge to profits tax on short-term gains, and the Amendment simply ensures that it shall not do so.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 10.—(CHARGEABLE ASSETS.)

6.15 p.m.

Mr. Douglas Jay: I beg to move, in page 12, line 46, to leave out from the beginning to the end of line 3 on page 13.

The Chairman: With this Amendment may be discussed the next Amendment in the name of the right hon. Gentleman, in page 13, line 1, to leave out from "a" to the end of line 3 and to insert "commodities market".

Mr. Jay: We have tabled the Amendments because we are not convinced that the Government are justified in very largely excluding commodities from the chargeable assets which attract this short-term gains tax.
We are here dealing entirely with short-term gains on commodities made by individuals and not by trades or businesses. If such profits or gains are made in the course of trade or business, they are all, as I understand the Bill, dealt with anyway by the exclusion which appears in Clause 9 (1). We are, therefore, concerned with profits made out of dealings in commodities by individuals.
What the Government propose to do is to charge the tax only in the case of dealings on a futures market or dealings with or through a person already engaged in dealing with a futures market. That follows from the words in Clause 10 (2, a), which we are proposing in the first Amendment to omit. The first Amendment would, therefore, include in

the charge for this tax all such dealings in commodities. The second Amendment, by a slight difference, would include only those where the dealings were on a recognised commodity market.
I suppose the Government wish to confine this tax to dealings connected with futures operations on the ground that those are in some sense speculative gains, whereas if the individual simply buys commodities and holds them perhaps in the hope of making a profit through a rise in the price, this is not to be regarded as speculation but is, in some sense apparent to the Chancellor of the Exchequer, morally distinguishable from a futures operation. I should like to hear what the Economic Secretary has to say to substantiate this. My hon. Friends and I are not convinced that there is any valid distinction.
If some individuals get together, though not in the course of regular trade or business, and form a consortium or if they just act as individuals and buy commodities with a view to making a profit, make a gain over a period, sell the commodities and receive the gain, surely that is a perfectly proper object for taxation, just as if they had done the same thing in the case of securities.
I think the Economic Secretary will remember the celebrated case in 1934 or 1935 when there was some very large-scale speculation in the City of London in pepper and shellac particularly and one or two other commodities. If my memory is correct, that was organised by individuals, and it ran to some very large figures and had some very lamentable consequences not merely for the people concerned but for a number of others engaged in business in the City. I should have thought that was speculation, and if one is to have a short-term gains tax, I do not see why the profits from that sort of thing should not be subject to the tax.
Suppose the commodities were bought not with the purpose of making a short-term gain but, for some other reason, and were held for a period—presumably it would be for less than six months—and were then sold and a gain was made. Even in that case I do not see why such a gain should not be a suitable object of tax.
I think that throughout the whole of this tax one has to ask oneself, "If we


tax income, why should we not tax gains in some other form which are just as reputable as income, wages or salaries or most of the incomes that most of us earn, and are receipts which are open to the individual who receives them to spend?" Even if the gains are made in that way, in a perfectly bona fide operation with no speculative intent, I do not see why they should not be liable to tax in just the same sense as ordinary wages, salaries, fees or, indeed, investment income.
As I understand the Bill—the Econmic Secretary can tell me if I am wrong —we have now reached the following position. Under this tax provision, if a trade or business makes a short-term profit by buying or selling commodities, it will then be taxed anyway under Income Tax and Profits Tax. If an individual makes a short-term profit by buying stocks and shares on the Stock Exchange, then he will be taxed entirely without regard to whether there was a futures market, or whatever would correspond to that on the Stock Exchange. If an individual deals in commodities through a futures market, then he also will be taxed. But if an individual deals in commodities but not through such a market, then he will escape taxation.
That is what the Bill appears to us to say. If that is so, I cannot see the justification for the distinction. Unless the Economic Secretary can produce a much more valid reason than the Government have done hitherto, I feel that the case for the Amendment has been made.

Mr. Barber: It is very useful that these Amendments have been selected, because it gives me the opportunity of clearing up a point which frankly troubled me when I first saw the Clause in draft. I asked why the charge should be limited by reference to a futures market, and that is. I think, really the nub of the argument put forward by the right hon. Member for Battersea, North (Mr. Jay). But I think that when I have explained the reason for the existing wording, he and the Committee will be satisfied that it is right.
The first subsection excludes tangible moveable property generally from chargeable assets. The second subsec-

tion, which the right hon. Member for Battersea, North wishes to amend, provides that tangible moveable property shall be chargeable in the case of, inter alia, commodities.
in relation to any acquisition and disposal by a person dealing on a futures market or dealing with or through a person ordinarily engaged in dealing on a futures market.
I cannot believe that the consequences of the first Amendment are what the right hon. Gentleman would wish. It would have the rather silly result of making a bag of flour bought from a grocer a chargeable asset. The right hon. Gentleman said that if commodities were bought and sold, even though they were not bought and sold with a view to making a profit, they should be subject to tax under Case VII, and I realise that what he has in mind is not the sort of case I have mentioned, that of the bag of flour, but the imposition of a charge on a person who deals with commodities in bulk otherwise than on a futures market.

Mr. Jay: Presumably a bag of flour would not be chargeable unless both bought and sold in the limited period.

Mr. Barber: That is certainly so, but there may be cases where quite small quantities of commodities are bought and sold, but are not bought originally with a view to speculation. I should have thought that it would have been quite ridiculous for those commodities to fall within the ambit of the charge.
It is quite unnecessary to bring the purchase and sale of commodities in bulk within the scope of Case VII because they are already dealt with under Case I of Schedule D. There is no difficulty, either in law or practice, about making a charge under Case I of Schedule D where the commodities are dealt in by a person who takes possession of them, because that person is clearly taxable under the existing law. I do not wish to weary the Committee with examples, but I can assure the right hon. Gentleman that it is wrong to say that a person of that kind would escape tax under the subsection as now drafted, because in any event he would be taxed under Case I of Schedule D.
There was a well-known case of a gentleman, I think that he was a moneylender, who bought a large quantity of


paper in Berlin, an isolated transaction, and sold it at a profit. He was dealing in a commodity and it was held by the courts that he was taxable under Case I on the ground that it was an adventure in the nature of trade. This was not, to use the right hon. Gentleman's words, in the regular course of his business, but it resulted, nevertheless, in the gentleman concerned being liable to tax. I make that point because it is quite wrong to think that a person who buys and sells a commodity in bulk, even in an isolated case, can escape Income Tax, and Surtax if appropriate.
The second Amendment would substitute the words "commodities market" for "futures market", but, for reasons which I have already mentioned, a person who buys an actual consignment of, for instance, tea would already be liable to tax under Case I. Moreover, the Amendment is unsatisfactory in that its results would be that the charge would not apply to dealings in futures not carried out by the speculator directly on a futures market, but indirectly to a person engaged in dealing on such a market.
I have already explained that earlier, when the Bill was being considered in draft, I raised the issue of this paragraph. When the Amendments appeared, my right hon. and learned Friend the Attorney-General and I gave further consideration to them. If we had thought it right, we should not have hesitated to accept either one or both, or, as an alternative, to move a Government Amendment. But we are satisfied that the wording as it stands is satisfactory for the intention of both sides of the Committee. For those reasons and with that explanation, I hope that the right hon. Gentleman will not think it necessary to press the Amendment.

Mr. Jay: The Economic Secretary has been right to say that it was necessary to elucidate this point. He now tells us that if an individual engages in buying and selling commodities, he is then liable to tax under Case I of Schedule D. Is he quite sure that that is so, even though it is not in the way of trade or as a regular operation, but as a purely isolated operation by one individual? The hon. Gentleman has the advice of the Attorney-General to fortify him. If he is telling us that, I do not quite see

the purpose of his previous argument about the bag of flour, because in that case, if an individual buys a bag of flour and sells it later and makes a profit, he would be liable to tax under Case I of Schedule D. If that so, why is it so wrong that we should propose an Amendment which would make such buying and selling of a bag of flour liable to tax? The hon. Gentleman ought to make it a little clearer so that we can be quite sure that the two halves of his argument do not move in opposite directions.

Mr. Barber: Under Case I of Schedule D, the question is whether an isolated transaction amounts to an adventure in the nature of trade. In the case of commodities which are dealt with in bulk, depending on the circumstances of the case, it is likely to be held to be an adventure in the nature of trade. On the other hand, if somebody buys a bag of flour and then decides that he does not want it and sells it, he is not trading or engaging in an adventure in the nature of trade. All this would depend on the circumstances of each case. All I am saying is that, in general, where the individual takes possession of the commodity in question, the Inland Revenue does not expect any difficulty in charging tax under Case I, but the difficulty which might arise is in the case where the person does not actually take possession but deals on a futures market. It is because of that difficulty—although it might not apply in many cases—that the Inland Revenue thought that the point should be covered as it is.

6.30 p.m.

Mr. J. T. Price: The Economic Secretary has made a very courteous and diligent reply, but he has not gone very far in convincing some of us who have given some thought to this matter. I remind him that the operation of a futures market is very intricate. Before 1954, there was a futures cotton market which operated in Liverpool. I was privileged to be a member of the Standing Committee which dealt with the Cotton Act of that year and by which the Government virtually abolished that futures market.
But there are other futures markets, for instance, in wheat and other primary


products. I realise that in some circumstances a futures market is used as a hedge or insurance against certain contingencies which may arise in the course of business and in the buying of commodities for use in industry, and so on.
If it is claimed by Treasury Ministers that they will apply the capital gains tax to transactions on the futures market, it means, by implication, that they will also apply those advantages of debiting losses against gains in arriving at the taxable liability of a given firm or individual. If this is so, I warn the Committee that this will lead to other things. Clever people will realise that they are able to use the futures market and all the hedging operations that are part of the futures market in computing tax liability. They will do the vanishing trick, the Indian rope trick and other things towards which hon. Gentlemen opposite like to direct their energies to create a situation where calculated losses on a futures market are debited against gains which would otherwise be taxable.
Regardless of party politics, we often pass legislation which results in a civil servant having to sort out the position which arises in practice. If I were ruthless about this I would say, "Tell me, Mr. Economic Secretary, how your officials in the Treasury will apply this? For example, what records of transactions on the futures market exist which can be produced for taxation purposes?" If such records cannot be easily produced, we shall open the sluice gates through which a lot of dirty water will be released.
I am sceptical—I was going to say suspicious, but that is perhaps an unkind word—that if we bring this kind of arrangement into our tax procedures we will find that the futures market will be brought into all sorts of tax computations, and that the Inland Revenue will need more vinegar cloths than it has used so far, and this may be the beginning of a whole series of abuses which the House will have to correct.
Perhaps the right hon. and learned Gentleman the Attorney-General can say how this will be applied in practice to futures markets. How will the Inland Revenue compute liability on a capital gain on the futures market? If this

cannot be done, it means that we will have on the Statute Book something which, in practice, means nothing, except perhaps a device which may be used to escape taxation. I therefore reaffirm our belief that this Amendment would serve a useful purpose, and I hope that it will not be dismissed lightly. I do not think that the Economic Secretary has discharged his liability to the Committee to prove that the Bill, as drafted, will stand up to the practical situation that will develop when the Bill becomes law.

Mr. Nabarro: I should like to ask my hon. Friend why the Treasury Ministers have decided not to endeavour in Clause 15 to define, first, a futures market, and, secondly, a commodity. I may be lacking in knowledge of earlier financial Statutes, but, so far as I am aware, in recent years no definition has appeared anywhere of what is a futures market. Further, I am not aware that any definition has ever appeared in a financial statute of what is the technical meaning, within the narrow financial and fiscal sense, of the word "commodity". The proper place for those two terms to be defined is at the end of Clause 15, but I can find no reference to them in that Clause.
In the context of this Amendment we have had a reference to cotton, to tea, and I am told that we ought to have had a reference to an antique, and perhaps we ought also to have had a reference to a motor car. I do not know what a commodity is. As commodities are referred to in Clause 10 and in the Amendment which we are discussing, we ought to be given a definition of a commodity. Further, as there is on page 13 a reference to futures market, we ought to have a definition of that as well, and these two definitions, given verbally now, should, at the appropriate time and place, be written into Clause 15.

Mr. Mitchison: For once, I have quite a lot of sympathy for the hon. Member for Kidderminster (Mr. Nabarro). For instance, if we consider motor cars, I wonder whether, if a motor car manufacturer gets seriously behind with his delivery of cars, orders to him are orders for a commodity on the futures market. I can hardly think that that is intended. It does not sound sensible, but I think that there are borderline cases, and that


it would have been better to have attempted some sort of definition. It is a great advantage to have the right hon. and learned Attorney-General here because, ex officio, he carries the law in his head.
I was puzzled by the speech of the Economic Secretary. He said, first, that all dealings in commodities other than dealings in futures markets would be caught by Case I. Case I, however, simply says that it is in respect of trade carried on in the United Kingdom or elsewhere. We come back to the question raised by the beginning of this part of the Bill: is it, or is not, the profit of trade? That is the Case I answer, and I hear a still small voice say that it depends on the nature of trade.

The Attorney-General (Sir Reginald Manningham-Buller): That charge extends not only to those carrying on trade, but to those who engage in an adventure in the nature of trade, even though it may be a completely isolated incident.

Mr. Nabarro: Both the hon. and learned Member for Kettering (Mr. Mitchison) and my right hon. and learned Friend the Attorney-General used the words "an adventure in the nature of trade". My hon. Friend the Economic Secretary said that it may be a single transaction by a private individual. If I buy a motor car for £500 next month with a view to reselling it at a later date at a profit, and I sell it at a profit for £600 one month later, surely that is an adventure in the nature of trade?

The Attorney-General: The Attorney-General indicated assent.

Mr. Nabarro: My right hon. and learned Friend is nodding. Is it, or is it not? If it is, I have done it scores of times. Am I about to be apprehended by the Inland Revenue and be charged for Income Tax and Surtax for the last seven years?
This is not hypothetical. It is a very serious matter. I want to know, first, whether the transaction which I have related is an adventure in the nature of trade, secondly, whether a motor car is a commodity, and, thirdly, whether I am dealing in a futures market?

Mr. Mitchison: I am most grateful to the hon. Member for Kidderminster for his intervention, because one thing which emerges quite clearly is that if he made any profits of this character he did not return them in his Income Tax return.

Mr. Nabarro: I did not.

Mr. Mitchison: I am sure that he will not mind saying so. It would not necessarily occur to me to return them in my Income Tax return.
I will not attempt to answer the hon. Gentleman's question, but it illustrates the real point of the Amendment. Later in his speech the Economic Secretary seemed to agree that it depended on the circumstances of the case. I am speaking purely from memory. I had not intended to intervene. If I remember rightly, the leading case in this respect was that of a man called Martin, who bought a large quantity of surplus linen shortly after the First World War. The case went to the House of Lords on the question Whether this was an adventure in the nature of a trade. It is a very difficult question, which will arise in all sorts of cases in connection with this part of the Bill.
If that is the point—and it was the only one raised—what is the harm in accepting the Amendment? Whatever definition we produce of "commodities", "futures market", and the rest, dealings in commodities on a futures market must also be dealings in commodities on a commodities market, that is to say, a commodities market would certainly include the specific case which the Government have in mind. It would also include all proper cases of dealings which were not in futures, and about which there might be some doubt and some quite innocent non-disclosure. I would not include dealings in motor cars by the hon. Member for Kidderminster or myself.
The Government are now to tax short-term gains in rubber plantation shares, for instance. I believe it to be a fact that some people, instead of speculating in rubber shares, speculate in rubber. They may do so in a futures market, but I suppose that cases will occur in which they take delivery of the rubber, hold it for a bit, and then ultimately sell it.


From the point of view of the Government there is no distinction whatever between that kind of case and dealing in rubber shares. The only distinction is said to depend on the question whether or not the persons concerned are necessarily engaging in a trade by doing so.
I should have thought that there was quite enough doubt about the matter to warrant the Government's incorporating the wider phrase which the Amendment seeks to cover. It removes the element of uncertainty which was given us by the Economic Secretary's admission that it must depend on the circumstances whether it is a question of engaging in a trade. I am not trying to compete and to suggest cases where it might not be in the nature of a trade; if I did I should almost certainly make the wrong suggestions. But I would have thought—and this was borne out by the experience of my hon. Friend the Member for Sowerby (Mr. Houghton)—that there were doubtful cases in practice, where the element of doubt took the form of a taxpayer's quite innocently not returning what he should have done.
I cannot see any harm in accepting the Amendment. It would cover any sort of doubtful case. As I understand, the trade has to be in goods in some form or another, and it is apparently not an adventure in the nature of trade if a person buys futures and resells them. I am a little puzzled by the Government's saying that, and I should like to repeat what I said in order to make certain that I have it right. I was not sure whether the Economic Secretary heard what I said. Do the Government consider that the purchase of futures and the sale of futures afterwards is not a dealing in the nature of trade? That is to say, do the Government say, "If you buy the goods in practice and sell them, that is an adventure in the nature of a trade in the vast majority of cases, but if you buy futures and sell them that is not an adventure in the nature of a trade"?
Is there any foundation for a definition, or are the Government trying to cover a case in which there might be exceptional circumstances? My impression—which I give with diffidence, because I have not had an opportunity to

look into the matter properly, and I have to rely on the intimate knowledge of the Attorney-General—is that no harm could be done by accepting the Amendment, and that we might include some doubtful cases which would otherwise fall between the provisions of the Bill, on the one hand, and the Case I cases of dealings in the nature of a trade, on the other.
I therefore suggest that the Government should consider what objection there is to accepting the Amendment. If they find that there is none I hope that they will accept it.

6.45 p.m.

Mr. Barber: First, I should like to deal with the last point raised by the hon. and learned Member for Kettering (Mr. Mitchison) and also by the hon. Member for Westhoughton (Mr. J. T. Price), namely, the question whether dealings in futures were or were not already within the tax net under Case I of Schedule D. It has already been clearly established by the courts that where a person frequently or habitually deals with commodity futures he is liable to tax. There is case law on this point. The difficulty which has arisen for the Inland Revenue authorities occurs where a person on only one occasion or only very occasionally deals on a futures market. In such cases the authorities have some difficulty in establishing liability.
The position of futures will be made clear by paragraph (a). Indeed, all that we have been seeking to do in that paragraph is to try to cover the sort of case in which the Inland Revenue has had difficulty, and which is not covered by existing law. I can only tell the hon. and learned Member that as a matter of law where the title to certain commodities passes to an individual and he then disposes of it there is no doubt that that he is liable to tax if he bought the commodity in bulk and it was in the nature of a trade. The difficulty arises in cases where he does not get a title to the goods but operates only occasionally on a futures market.
The hon. Member for Westhoughton was troubled about the question of losses. He thought that in some way somebody could engage in a racket by using these provisions in order to make losses deliberately——

Mr. J. T. Price: I am quite sure he could.

Mr. Barber: —on a futures market and set those losses off against other income. It may cause him to change his mind if I tell him that the Bill is so drawn that a Case WI loss can be set off only against a Case VII profit. I cannot see that there will be the opportunity which he envisages of setting off losses made deliberately—and I cannot understand why anybody should want to make a deliberate loss on a futures market. In any event, he certainly will not have an opportunity of setting off those losses against other sources of income.

Mr. J. T. Price: I am obliged to the hon. Member. I hope that his optimism is well founded, but there are some very ingenious people at large in the City of London and elsewhere who know the way round awkward corners. I should also like to know about the recording of transactions on a futures market. Is not the Minister aware that many futures markets operate on the basis of growing crops? If the period over which a capital gains tax can be levied is six months, the period of the levy may be shorter than the period of the market. How can we operate a capital gains tax limited to six months with a market that may operate for longer than six months?

Mr. Barber: That is a point which has not escaped the notice of the Chancellor of the Exchequer, but we came to the conclusion that as we were here dealing only with a very limited category of transactions, as I think is apparent from what I have been saying, it would not be worth while introducing a special code to deal with such transactions. We believe that this will catch the majority of transactions by way of dealing in a futures market which we wish to catch.
My hon. Friend the Member for Kidderminster (Mr. Nabarro) asked one or two questions about the purchase and sale of motor cars. Whether or not the purchase and sale of a motor car by an individual in any particular case gives rise to liability to tax under Case I must depend on all the circumstances of the particular case. I certainly would not presume to advise him. I can only say that if I were not standing at this Box and if he had done merely what he said

he did I should be very happy to look after his interests and I hope that he would not have to bear any tax on the profit he might have made.
On the question of whether we should define "futures market" and "commodity," as my right hon. and learned Friend pointed out, those words will bear their ordinary meaning. It will be a question for the court to decide in any particular case whether the circumstances amount to a futures market or whether any particular item is a commodity, but I should have thought that in the general run of cases the court would have no difficulties.

Mr. Nabarro: I could not myself define a "futures market" and neither could I define the word "commodities," because they have different meanings in different applications in both cases. "Commodities" may or may not in a market sense connote raw materials. The word could in certain circumstances connote manufactured goods. I know that it does not generally connote manufactured goods, but the Inland Revenue has strange habits and might consider that "commodities" covered manufactured goods as well as raw materials. The hon. Member for Westhoughton (Mr. J. T. Price) came nearest to the truth when he referred to futures dealing mostly with growing crops. That is so and commodities are generally the derivatives of crops which have been grown, but not necessarily so.
I appeal to my hon. Friend the Economic Secretary when embarking on a venture of a new form of taxation for the first time in this country not to leave these grave points of dubiety about what is a commodity and what is a futures market. They both ought to be carefully defined. I quarrel at once with my right hon. and learned Friend the Attorney-General when he says that the ordinary accepted interpretation of the word "commodity" is good enough. It may be good enough for the layman but it should not be good enough for legislators in this Committee.

Mr. Barber: I hope my hon. Friend will agree that there is at least another point of view, that in view of the sort of difficulties which operate in his mind it might have been very difficult for us if we had attempted to define the word


"commodities". I do not know if be has in mind that we should have listed various items of property, but if we had done that we should have been giving a definition which would be far too narrow. If we went further than that and tried to use a form of words to define "commodity", I think that we would have got into equal difficulties.

Mr. Nabarro: My hon. Friend is now making the whole position much worse. For example, is an antique a commodity?

Mr. Barber: I think it may well be, but it would be liable to tax under Case VII only in so far as this particular paragraph applies if it were dealt with on a futures market. This is what I have been saying all along. We are here dealing with a subsection which has a very limited application.
The hon. and learned Member for Kettering (Mr. Mitchison) quoted from the Income Tax Act, 1952, the words relating to a charge of Case I of Schedule D. I wish to make this clear, because I think some hon. Members may not quite have understood the significance of the words "adventure in the nature of trade". In Section 526 of that Act, "trade" is defined as including:
every trade, manufacture, adventure or concern in the nature of trade.

Mr. Jay: Not a very good definition.

Mr. Barber: The right hon. Member says that it is not a very good definition, but it is one which has been used for many years and has been considered the whole basis of charge under Case I of Schedule D.
The hon. and learned Member asked why we do not propose to accept this Amendment. It is because in our view the sort of cases he had in mind are already covered as the law stands by Case I of Schedule D, and the Inland Revenue has considerable experience in these matters. It takes the view that purchase and sale of commodities in bulk where the title passes will not cause any difficulty in practice.

Mr. Mitchison: I have now found the Martin case. It was Martin and Lowry, 1927, appeal cases, which I am

sure is even more well known to the Attorney-General than numerous other cases he remembers. It depended on a finding of fact by the Commissioners. It seems that there must be a finding of fact in these cases. To put it in non-legal language, it must depend on the circumstances of whether or not the transaction amounts to trade in the sense of the definition at the end of the 1952 Act. If that is the position, which seems tolerably clear not only from this case but from what the Economic Secretary said when he first spoke, what is the objection to covering the possible gap by accepting the Amendment? It would not interfere with the Government's intentions in any way and would cover only the exceptional cases which otherwise might be excluded.

The Attorney-General: I might be able to help the hon. and learned Member. Of course it is a question of fact whether a particular adventure is "an adventure in the nature of trade" or not. In the case he referred to there was not difficulty in coming to the conclusion. It was the only conclusion to which any tribunal could probably have come, that there was in fact an "adventure in the nature of trade". When we found, as in the case which my hon. Friend the Economic Secretary referred that a moneylender was suddenly buying a large quantity of paper in Berlin and selling it for a large profit in this country immediately after the First World War, there was only one conclusion possible, that it was "an adventure in the nature of trade".
I ask the Committee to bear in mind that if that be so it follows that one need not cover that ground again in relation to Case VII. One has to distinguish between an adventure in the nature of trade and the disposal by my hon. Friend the Member for Kidderminster (Mr. Nabarro) of his worn out motor cars at a profit. No one would seriously suggest that the disposal of cars for which he has no longer any use and which he bought for his own use, convenience, adornment and decoration, is an adventure in the nature of trade. It comes down to a small compass, that we are seeking to make sure that we cover the field for Case VII which otherwise might escape outside the net. The particular difficulty here


is the dealings on a futures market. We think that there must be express provision for that. We do not think that any other express provision is required.
7.0 p.m.
When I am asked whether we should define "commodities" and "futures market", I would point out that in dealing with words in ordinary use in the ordinary English language we sometimes make the matter far more complicated and far more difficult to administer by seeking to define plain, ordinary English words. I am, therefore, reluctant to accept my hon. Friend's invitation to seek to define, for the purpose of this provision, "commodities" and "futures market". In interpreting whether the matter comes within the definition, the courts will have regard to the conjunction between the word "commodities" and the words "futures market".
From the moment that we saw the Amendment on the Notice Paper we gave considerable thought to the wording. I do not believe that there is any difference between the two sides of the Committee in what we want to achieve on this point, but in the light of the advice which we have received from the Inland Revenue and such consideration as we have given to it, we think that this is the best wording for this point and we think it wise to leave it where it is.

Mr. Jay: I should like to address a further question to the Economic Secretary or the Attorney-General, because the more often they speak the more puzzled I am about the Clause, Whatever other hon. Members feel. The Economic Secretary told us that if there were an isolated transaction by an individual it was already liable to tax provided that it was an adventure in the nature of trade even though it were an isolated transaction. If the hon. Member for Kidderminster (Mr. Nabarro) bought and then sold a motor car, a bag of flour, some cottton, or any of these things, and made a profit, if it were an adventure in the nature of trade this would be liable to tax even though he had never done it before and never did it again.
We inquired whether it was necessary to have these words about futures markets in the Bill. The Economic Secre-

tary said that the trouble is that if people deal habitually on a futures market they are engaging in a trade and are liable to tax anyway, but, he said, supposing there were just as isolated operation on the futures market, the difficulty of the Inland Revenue was that that might not be liable to tax.
Why should that be true of an operation on the futures market and not of the individual transaction of the hon. Member for Kidderminster or anyone else? If that operation, though isolated, is liable to tax, surely the dealings on the futures market, which, to a layman, appear prima facie to be much more in the nature of trade, must also be liable. It does not seem to me, therefore, that the Economic Secretary has made out any case on the substantive point of our Amendment that it is necessary to have these words in the Bill specifically making operations on the futures market chargeable and other commodity operations not chargeable, and unless he can answer that question I feel that he has not made out his case against the Amendment.

Mr. Graham Page: With great respect to my right hon. and learned Friend, I feel that the longer this debate continues the more necessary it is to define not necessarily commodities but at least futures market and to distinguish it from the ordinary market. I can appreciate that commodities which are in being and which pass through hands in an ordinary transaction will then, if they are purchased in bulk and sold in bulk, eventually be an adventure in the nature of trade. If they are bought singly or sold singly they may or may not be, depending on the circumstances and the intentions of the dealer.
Is the distinction between this sort of transaction and those mentioned in the subsection as commodities being dealt with in a futures market the fact that the commodities are not in existence? Is that the real meaning of a futures market? My hon. Friend the Member for Kidderminster (Mr. Nabarro) tried to make a distinction between manufactured goods and raw materials, but surely that is not the distinction between a futures market and an ordinary market. Is it that the commodities are not in existence or is it that delivery of


the commodities has not been received? A growing crop may be in existence, but when it is dealt with on a futures market, one does not actually receive delivery of the goods. Is that the distinction?
Whether the distinction is manual delivery or that the goods are not there at all, surely can be defined in the Clause. The importance of defining it is that if a person is dealing on the futures market regularly he will be taxed as if it were his normal trade. I understand that at the moment if he does one deal in it, he is not taxed at all. He will be taxed under the Clause, but he will be taxed on it being unearned income, whereas, of course, if it is trading in the futures market, it is taxed as being earned income. It is necessary to distinguish exactly what is caught under the Clause and what is caught under existing law as an adventure of trade.

Mr. J. T. Price: I must agree with what was said by the hon. Member for Crosby (Mr. Graham Page). Without taking too long about it, may I add that I cannot understand why the Attorney-General and the Economic Secretary are so squeamish about defining the terms relevant to the proposition which they are putting before the Committee. It is too easily assumed, as a matter of principle, that if the Bill is silent as to what is meant by a certain reference when it leaves the House, then perhaps when it comes to applying the legislation to the taxpayer a very clever and erudite official in the Ministry will be able to interpret it and to apply it with discretion and equity.
As a matter of principle, I deny that that should be the case. As a matter of justice between one citizen and another, I strongly object to any legislation of a controversial nature leaving the House—and this is controversial, although I am not dealing with the merits of it—in which the decision as to what is meant by the Clause which is to operated is left to the capricious discretion of some civil servant.
The right hon. and learned Gentleman says that the courts will construe it and will decide what is meant by the legislation. It is too frequently assumed in the House that all matters of dispute go to a court of law. The individual citizen is often in a specific situation with regard

to legislation in which be cannot afford to exercise his legal remedy of having the question resolved by a learned judge. This assumption which runs through so many of our debates is that if the terms of the legislation are not defined, then a learned judge will make case law and it will all be in the books as a piece of jurisprudence on which future generations can rely.
But that is not in accordance with the facts of life. For every case which comes to a decision of a court of law there are 10,000 cases which are dealt with in a pragmatic hit-and-miss fashion, and ultimately the civil servant, the official, has to decide them. This is why we are always having arguments in the House that we should set up some kind of Ombudsman who could act as a judicial authority between the citizen and all these people in the Civil Service who are constantly oppressing him.
I think that many of the charges against the civil servants are exaggerated and unfair. But can we say that we are worthy of our name as legislators, on whichever side of the Committee we sit, when we deliberately let Cabinet Ministers and leading members of the administration say, "We do not like defining what this means. It is too difficult"? That is not good enough. When we are dealing with a word such as "commodity" in relation to taxation, we should be prepared to say what "commodity" means. If we do not know we must send for the editor of Webster's Dictionary, or the Oxford Dictionary, or a learned pedagogue who will tell us.

Mr. Callaghan: Or alter the wording.

Mr. Price: If anybody wanted "a futures market" defined, I should be very reluctant to offer a definition, except in a rough and ready way, but it would probably be a sensible definition. I would say "off the cuff" that if we are dealing with a futures market we are dealing with a man or a group of people operating a market in which they buy something which does not exist, with money they have not got, with no intention of ever taking delivery of the commodity they have contracted to buy. I do not see why we should not have a note of levity in this, because very often


the satirical approach to some of these questions is best.
We are always running away from defining terms in Parliament. If I make a controversial speech in Standing Committee and am not very careful as to how I use the Queen's English, for which I have a great respect, an hon. Member opposite will immediately challenge me to define what I am talking about. I generally know what I am talking about. I hope that I convey it in robust English which is not unfairly exaggerated.
I put it to the learned Attorney-General, whom we are very glad to see with us this evening, that it will not do for a senior Minister of the Crown, and a Law Officer at that, to say at the Dispatch Box, "We do not like defining this because it is too difficult". He must try again. Unless he can make more sense of it, I suggest that the Committee should give us a run for the Amendment, because it would at least put some common sense into the Clause.

The Attorney-General: I listened with enjoyment to the speech of the hon. Member for Westhoughton (Mr. J. T. Price). I did not say that the Government would not put forward a definition because it would be too difficult. Listening to the hon. Member I began to wonder whether we ought not to attach a dictionary to each Finance Bill. We are often in danger of complicating our legislation by seeking to define unnecessarily words as to the meaning of which people have no serious doubt. I know that that is a very different approach from the approach of the hon. Member.
I am reluctant to put definitions in, unless the case for them is clearly made out. I do not think that the case is made out here. We are here considering dealings in commodities on a futures market. Those who have to apply the Measure will have no difficulty in dealing with that. It is not accurate to say that the decision will rest just with civil servants. That will not be so. The Inland Revenue may raise an assessment. It may be challenged. It will then come before the General Commissioners of Income Tax, an independent body. It may then go all the way up. I see no difficulties in the Clause operating in its present form.
I come to the substance of the matter, the point raised by the right hon. Mem-

ber for Battersea, North (Mr. Jay). Here we are in a somewhat difficult field, because an isolated transaction in the nature of trade is taxed under Case I of Schedule D. Then the right hon. Gentleman asked about an isolated transaction in commodities on a futures market and teased my hon. Friend the Economic Secretary a little about his observations about a person who ordinarily engages in dealings in commodities on a futures market. When he ordinarily deals in such a way he is taxed, not under Case I of Schedule D, but under Case VI—and it is for the dealing, the carrying on of a business.
The gap which is left under the existing law and which we want to cover for the purposes of Case VII is where the carrying-on of dealings—a business —in commodities on a futures market cannot be established, where a person is carefully avoiding the possibility where he can be held to be engaged in trading, but is coming into the market just now and then to try to secure what is, in our view, a speculative gain which should be liable to tax. That is why we have put this special provision in subsection (2, a). In our view, that is all that is required.

Mr. Jay: The Attorney-General even now does not seem to make it clear why he thinks that an isolated transaction not on a futures market is already liable to tax, whereas an isolated transaction on a futures market is not now liable to tax.

The Attorney-General: As to an isolated transaction, an adventure in the nature of trade, I have a mass of case law on which I can rely. As to an isolated transaction on a futures market, which may be a very different thing from an adventure in the nature of trade, the Inland Revenue has not any authority at present. That is what we are seeking to get by this Measure.
I have done my best to make this clear to the Committee. I agree that it is a point of importance. I do not think that we shall gain any benefit from anyone's point of view by seeking to define the words in question. I think we can leave it to the Commissioners to express their view, applying the ordinary meaning of the English language to those words, read in conjunction with commodities on a futures market. We


have spent a considerable time discussing the Amendment. I make no complaint of that. However, we have a great deal of other business to do and I cannot see that I can usefully add anything to what I have already said upon the Amendment.

7.15 p.m.

Mr. Frederick Gough: I must make my position clear. There is a very bad habit in which we all indulge—I more than many—of going through the Division Lobby without having the foggiest idea of what we are voting about. In this case I have been here from the word "go". I have heard every word said by the right hon. Member for Battersea, North (Mr. Jay) and by my hon. Friend the Economic Secretary. I have listened to two or three speeches from my right hon. and learned Friend the Attorney-General, but I have not got the foggiest idea of what all this is about.
From a purely practical point of view the hon. Member for Westhoughton (Mr. J. T. Price) suggested an Ombudsman. I should like an Ombudsman to go into a very small room with the right hon. Member for Battersea, North, my right hon. and learned Friend the Attorney-General and my hon. Friend the Economic Secretary, because this is the gravamen of the matter. The right hon. Member for Battersea, North made his speech. The opening remarks of my hon. Friend the Economic Secretary were, "I entirely agree. We all have the same idea. We all want to deal with the man who has a go in com-

modities instead of having a go on the Stock Exchange".

That puts the matter in simple words of one or two syllables. Then we got bogged down because my hon. Friend the Economic Secretary said that that was what he thought until he got hold of the draftsman. Once one gets hold of the draftsman one is sunk anyway.

Then we got into the position of having the words "a futures market". I have worked in the City of London for thirty years, but I do not know the definition of "a futures market". There are all sorts of complications. People deal in futures in tin, zinc, and babies at Lloyds. We issue policies against twins. That is a futures market.

Mr. Nabarro: Is a twin a commodity?

Mr. Gough: That is what I was coming to. The learned Attorney-General said that these were plain, ordinary English words. My wife uses plain, ordinary English words, but she does not say to me, "Would you like some commodities and bacon for supper?" Commodities cover a very wide field indeed.
To be serious for a minute, would my right hon. and learned Friend think again about this? I believe that both sides have the same object in view. At the moment it is so unclear that I have no intention of going into either Division Lobby.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 222, Noes 168.

Division No, 224.]
AYES
[7.20 p.m.


Agnew, Sir Peter
Brown, Alan (Tottenham)
Crowder, F. P.


Amery, Rt. Hon. Julian
Browne, Percy (Torrington)
Curran, Charles


Arbuthnot, John
Buck, Antony
Dance, James


Aihton, Sir Hubert
Bullus, Wing Commander Eric
d'Avigdor-Goldsmid, Sir Henry


Atkins, Humphrey
Burden, F. A.
Deedes, W. F.


Balniel, Lord
Campbell, Sir David (Belfast, S.)
de Ferranti, Basil


Barber, Anthony
Carr, Compton (Barons Court)
Digby, Simon Wingfield


Barlow, Sir John
Carr, Robert (Mitcham)
Donaldson, Cmdr. C. E. M.


Barter, John
Cary, Sir Robert
Drayson, G. B.


Baxter, Sir Beverley (Southgate)
Chataway, Christopher
du Cann, Edward


Beamish, Col. Sir Tufton
Chichester-Clark, R.
Duncan, Sir James


Bell, Ronald
Clark, Henry (Antrim, N.)
Eccles, Rt. Hon. Sir David


Bidgood, John C.
Cleaver, Leonard
Elliot, Capt. Walter (Carshalton)


Biffen, John
Cole, Norman
Emery, Peter


Biggs-Davison, John
Collard, Richard
Emmet, Hon. Mrs. Evelyn


Bishop, F. P.
Cooper, A. E.
Errington, Sir Eric


Black, Sir Cyril
Cordeaux, Lt.-Col. J. K.
Erroll, Rt. Hon. F. J.


Bossom, Clive
Cordle, John
Farey-Jones, F. W.


Bourne-Arton, A.
Corfield, F. V.
Farr, John


Bowen, Roderic (Cardigan)
Coatain, A. P.
Fell, Anthony


Boyle, Sir Edward
Coulson, Michael
Finlay, Graeme


Brewis, John
Crawley, Aidan
Forrest, George


Brooke, Rt. Hon. Henry
Critchley, Julian
Fraser, Ian (Plymouth, Sutton)




Gammans, Lady
Longden, Gilbert
Seymour, Leslie


Gardner, Edward
Loveys, Walter H.
Sharpies, Richard


Glover, Sir Douglas
Lucas-Tooth, Sir Hugh
Shaw, M.


Glyn, Dr. Alan (Clapham)
McAdden, Sir Stephen
Shepherd, William


Goodhart, Philip
McLaren, Martin
Skeet, T. H. H.


Goodhew, Victor
Macleod, Rt. Hn. Iain (Enfield, W.)
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Gower, Raymond
McMaster, Stanley R.
Smithers, Peter


Green, Alan
Macpherson, Niall (Dumfries)
Spearman, Sir Alexander


Gresham Cooke, R.
Maddan, Martin
Stevens, Geoffrey


Grimond, Rt. Hon. J.
Maginnis, John E.
Steward, Harold (Stockport, S.)


Grosvenor, Lt.-Col. R. G.
Manningtiam-Buller, Rt. Hn. Sir R.
Stoddart-Scott, Col. Sir Malcoim


Gurden, Harold
Markham, Major Sir Frank
Storey, Sir Samuel


Hamilton, Michael (Wellingborough)
Marlowe, Anthony
Studholme, Sir Henry


Harris, Frederic (Croydon, N.W.)
Marshall, Douglas
Summers, Sir Spencer


Harvey, Sir Arthur Vere (Macclesf'd)
Marten, Nell
Talbot John E


Harvey, John (Walthamstow, E.)
Mathew, Robert (Honiton)
Tapsell, Peter


Hastings, Stephen
Matthews, Gordon (Meriden)
Taylor, Edwin (Bolton, E.)


Hay, John
Mawby, Ray
Taylor, W, J. (Bradford, N.)


Heald, Rt. Hon. Sir Lionel
Maxwell-Hyslop, R. J.
Teeling, Sir William


Henderson, John (Cathcart)
Maydon, Lt.-Cmdr, S. L. C.
Thatcher Mrs. Marcgaret


Hendry, Forbes
Mills, Stratton
Thomas, Leslie (Canterbury)


Hicks Beach, Maj, W.
Morgan, William
Thompson, Richard (Croydon, S.)


Hiley, Joseph
Nabarro, Gerald
Thornton-Kemsley, Sir Colin


Hill, J. E. B. (S. Norfolk)
Neave, Airey
Touche, Rt. Hon. Sir Gordon


Hirst, Geoffrey
Noble, Michael
Turner, Colin


Hobson, Sir John
Nugent, Rt. Hon. Sir Richard
vane, W. M. F.


Hocking, Philip N.
Oakshott, Sir Hendrie
Vaughan-Morgan Rt. Hon. Sir John


Holland, Philip
Orr, Capt. L. P. S.
Vickers, Miss Joan


Hollingworth, John
Osborn, John (Hallam)
Wade, Donald


Hooson, H, E.
Page, Graham (Crosby)
Wakefield, Sir Wavell


Hopkins, Alan
Page, John (Harrow, West)
Walder, David


Hornby, R. P.
Pearson, Frank (Clitheroe)
Walker, Peter


Howard, Hon. C. R. (St. Ives)
Percival, Ian
Walker-Smith, Rt. Hon. Sir Derek


Hughes-Young, Michael
Peyton, John
Wall, Patrick


Hughes Hallett, Vice-Admiral John
Pickthorn, Sir Kenneth
Ward, Dame Irene


Hulbert, Sir Norman
Pitman, Sir James
Webster, David


Iremonger, T. L.
Prior, J. M. L.
Wells, John (Maidstone)


Irvine, Bryant Godman (Rye)
Profumo, Rt. Hon. John
Williams, Dudley (Exeter)


Jackson, John
Proudfoot, Wilfred
Williams, Paul (Sunderland, S.)


James, David
Pym, Francis
Wills, Sir Gerald (Bridgwater)


Jennings, J. C.
Quennell, Miss J. M.
Wilson, Geoffrey (Truro)


Johnson, Eric (Blaekley)
Redmayne, Rt. Hon. Martin
Wise, A. R.


Korans, Cdr. J. S.
Rees, Hugh
Wolrige-Gordon, Patrick


Kerby, Capt. Henry
Renton, David
Woodhouse, C. M.


Kirk, Peter
Ridley, Hon. Nicholas
Woodnutt, Mark


Lancaster, Col. C. G.
Rippon, Geoffrey
Woollam, John


Legge-Bourfce, Sir Harry
Roberts, Sir Peter (Heeley)
Worsley, Marcus


Lewis, Kenneth (Rutland)
Robson Brown, Sir William



Linstead, Sir Hugh
Rodgers, John (Sevenoaks)



Litchfield, Capt. John
Roots, William
TELLERS FOR THE AYES:


Lloyd,Rt.Hn.Geoffrcy(Sut'nC'dfield)
Ropner, Col. Sir Leonard
Mr. Gordon Campbell and


Lloyd, Rt. Hon. Selwyn (Wirral)
St. Clair, M.
Mr. Batsford


Longbottom, Charles
Scott-Hopkins, James





NOES


Alnsley, William
Delargy, Hugh
Herbison, Miss Margaret


Allaun, Frank (Salford, E.)
Diamond, John
Hilton, A. V.


Allen, Scholefield (Crewe)
Dodds, Norman
Holman, Percy


Awbery, Stan
Driberg, Tom
Houghton, Douglas


Bacon, Miss Alice
Dugdale, Rt. Hon. John
Howell, Charles A. (Perry Barr)


Baxter, William (Stirlingshire, W.)
Ede, Rt. Hon. C.
Howell, Denis (Small Heath)


Bence, Cyril
Edelman, Maurice
Hughes, Emrys (S. Ayrshire)


Bennett, J. (Glasgow, Bridgeton)
Edwards, Rt. Hon. Ness (Caerphilly)
Hughes, Hector (Aberdeen, N.)


Benson, Sir George
Edwards, Robert (Bilston)
Hunter, A. E.


Blackburn, F.
Edwards, Walter (Stepney)
Hynd, H. (Accrington)


Boardman, H.
Evans, Albert
Hynd, John (Attercliffe)


Bowden, Rt. Hn.H.W.(Leics. S.W.)
Fernyhough, E.
Irvine, A. J. (Edge Hill)


Bowles, Frank
Fitch, Alan
Irving, Sydney (Dartford)


Boyden, James
Fletcher, Eric
Janner, Sir Barnett


Braddock, Mrs. E. M.
Foot, Michael (Ebbw Vale)
Jay, Rt. Hon. Douglas


Bray, J. W.
Fraser, Thomas (Hamilton)
Jeger, George


Broughton, Dr. A. D. D.
Gaitskell, Rt. Hon. Hugh
Johnson, Carol (Lewisham, S.)


Butler, Herbert (Hackney, C.)
Galpern, Sir Myer
Jones, Dan (Burnley)


Callaghan, James
Ginsburg, David
Jones, Elwyn (West Ham, S.)


Castle, Mrs. Barbara
Gordon Walker, Rt. Hon. P. C.
Jones, J. Idwal (Wrexham)


Chapman, Donald
Greenwood, Anthony
Jones, T. W. (Merioneth)


Cliffe, Michael
Griffiths, W. (Exchange)
Kelley, Richard


Collick, Percy
Hale, Leslie (Oldham, W.)
Key, Rt. Hon. C. W.


Corbet, Mrs. Freda
Hall, Rt. Hn. Clenvil (Colne Valley)
King, Dr. Horace


Craddock, George (Bradford, S.)
Hamilton, William (West Fife)
Lawson, George


Cronin, John
Hannan, William
Ledger, Ron


Crosland, Anthony
Harper, Joseph
Lever, L. M. (Ardwick)


Cullen, Mrs. Alice
Hayman, F. H.
Loughlin, Charles


Davies, G. Elfed (Rhondda, E.)
Henderson, Rt.Hn.Arthur(RwlyRegis)
Mabon, Dr. J. Dickson







McCann, John
Paton, John
Soskice, Rt. Hon. Sir Frank


MacColl, Jamn
Pavitt, Laurence
Spriggs, Leslie


McKay, John (Wallsend)
Pearson, Arthur (Pontypridd)
Stewart, Michael (Fulham)


Mackie, John (Enfield, East)
Peart, Frederick
Stones, William


McLeavy, Frank
Pentland, Norman
Taverne, D.


MacPherton, Malcolm (Stirling)
Prentice, R. E.
Taylor, Bernard (Mansfield)


Mallalleu, E. L. (Brigg)
Price, J. T. (Westhoughton)
Thompson, Dr. Alan (Dunfermline)


Manual, Archie
Probert, Arthur
Thornton, Ernest


Mapp, Charles
Proctor, W. T.
Tomney, Frank


Marsh, Richard
Pursey, Cmdr. Harry
Warbey, William


Muson, Roy
Randall, Harry
Wells, Percy (Faversham)


Mendeleon, J. J.
Redhead, E. C.
Wells, William (Walsall, N.)


Millan, Bruce
Reid, William
White Mrs. Eirene


Milne, Edward
Roberts, Albert (Normanton)
Wilkins, W. A.


Mitchim, G. R.
Robertson, John (Paisley)
Willey Frederick


Monslow, Walter
Robinson, Kenneth (St. Pancras, N.)
Williams D J (Neath)


Moody, A. S.
Rodgere, W. T. (Stockton)
Willams, LI (Abertillery)


Morris, John
Rogers, G. H. R, (Kensington, N.)
Williams, W. R. (Openshaw)


Moyle, Arthur
Rots, William
Williams, W. T. (Warrington)


Mulley, Frederick
Royle, Charles (Salford, West)
Wills, E. G. (Edinburgh, E.)


Neal, Harold
Shinwell, Rt. Hon. E.
Wilson, Rt. Hon. Harold (Huyton)


Noel-Baker, Francis (Swindon)
Silverman, Julius (Aston)
Winterbottom, R. E.


Noel-Baker,Rt.Hn.Philip(Derby,S.)
Silverman, Sydney (Nelson)
Woof, Robert


Oliver, G. H,
Skefflington, Arthur
Wyatt, Woodrow


Owen, Will
Slater, Joseph (Sedgefield)
Yates, Victor (Ladywood)


Paget, R. T.
Small, William



Panned, Charles (Leeds, W.)
Smith, Ellis (Stoke, S.)



Parker, John
Sorensen, R. W.
TELLERS FOR THE NOES:




Mr. Grey and Mr. Ifor Davies.

7.30 p.m.

The Attorney-General: I beg to move, in page 14, line 3, at the end to insert:
(5) Subject to subsection (6) below, fixed plant or machinery which does not form part of a building or of a permanent or semi-permanent structure in the nature of a building, and which a person uses for the purposes only of a trade carried on by him, shall not be chargeable assets in relation to any acquisition or disposal of it by him; and this subsection shall apply in relation to the discharge of the functions of a public or local authority, and to the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits, as it applies in relation to a trade.
The Amendment arises out of a discussion we had in Committee when a point was raised about the position of fixed plant and machinery. On that occasion I said that I would further look into the matter. I think that the same point was also raised at that time by the hon. Member for Glasgow, Craigton (Mr. Millan).
The result of our consideration is that the Amendment has been tabled to make it clear that fixed plant and machinery is taken out. In view of the time we took in discussing the matter, I need not delay the Committee further because I think that the Amendment completely deals with the points raised by hon. Members, including the hon. Member for Craigton.

Amendment agreed to.

Mr. Barber: I beg to move, in page 14, line 6, at the end to insert:

nor shall rights to acquire in the future patent rights as respects any invention in respect of which the patent has not yet been granted.
The Amendment is little more than a drafting matter to deal with an oversight in the Bill as originally drafted. Clause 10 (5) deals with the question of patent rights and it excludes them from the scope of the charge under Case VII. The Amendment extends the exemption to cover rights to acquire future patent rights for inventions in respect of which patents have not yet been granted.
Patent rights are excluded under Case VII because the capital sums received on the sale of patent rights are already chargeable by virtue of a provision in the Income Tax Act, 1952. It would be inappropriate to leave a possible alternative charge under Case VII because the liability under the Section of the 1952 Act may be spread over a period of six years, which is obviously of advantage to the taxpayer. The Amendment is necessary because by virtue of paragraph 16 of the Sixth Schedule of the 1952 Act, amounts received for the sale of provisional applications for patent rights are deemed to be received for the sale of patent rights and are chargeable under the same Section as patent rights are charged. Clearly, the same exemption should be made in respect of Case VII as for patent rights themselves and that is the effect of the Amendment.

Amendment agreed to.

Further Amendment made: In page 14, line 7, leave out "Or (4)" and insert "(4) or (5)".—[The Attorney-General.]

Clause, as amended, ordered to stand part of the Bill.

Clause 13.—(DISPOSALS OF LAND EFFECTED INDIRECTLY.)

The Financial Secretary to the Treasury (Sir Edward Boyle): I beg to move, in page 19, line 26, at the end to insert:
Provided that in the application of this section to a disposal of shares acquired as legatee on a death a company shall be treated as not chargeable to tax under Case VII by reference to any acquisition of land made before the death.
The Amendment provides that in calculating the charge under the Clause on a legatee in respect of a disposal of inherited shares in a land-owning company, there shall be left out of account land acquired before the death giving rise to the legacy. This arises out of a discussion we had in Committee at the earlier stage of the Bill when my hon. Friend the Member for Crosby (Mr. Graham Page) moved an Amendment which had as its object the exclusion from the scope of the Clause of shares acquired as a legatee.
On that occasion my hon. Friend said in the short discussion that we had on this subject that a legatee may dispose of inherited shares purely for Estate Duty purposes and might find himself left with a legacy on which he had to pay both Estate Duty and tax under the Clause. On that occasion the hon. Member for Crosby was, I think, under some misapprehension. The payment of Estate Duty is the responsibility of the executors of the estate, who are exempt from Case VII liability in respect of the property of the deceased, and the executors would not normally pass over assets to the beneficiaries until the Estate Duty liability had been settled.
I think that it is unlikely, therefore, that a legatee would have to sell shares he has inherited in order to meet an Estate Duty liability. At the earlier Committee stage I said that it would be wrong to take inherited shares out of the Clause altogether, but I undertook to consider before the next stage of the

Bill, whether, in computing the charge on inherited shares that were sold, there should be an exclusion of land acquired by the company before the legatee acquired them.
We have looked at the matter again and, on reflection, it seems that the limitation under Clause 13 is justified. The effect of the Amendment is, therefore, to confine the charge on a legatee in respect of a disposal of shares in a land-awning company which came to him as legatee—I am deliberately using technical language because this is a narrow point—to confine the charge to the due proportion of the accretion in value at the time of the sale of any land then held by the company for less than three years which had been acquired after the death which gave rise to the legacy.
This is a narrow point and there is no question of going back on the general principle of the Clause nor could there possibly be any question of altogether taking inherited shares out of the Clause. The point raised by the hon. Member for Crosby was a reasonable one and I therefore advise the Committee to accept the Amendment.

Mr. Graham Page: I should like to express my gratitude to the Financial Secretary for tabling the Amendment. It covers the point I raised during the earlier Committee stage. However, I still think that I was correct, especially if one considers a residuary and not a specific legatee. He may be paying Estate Duty on the value of the shares by reason of the company owning the land, but when he sells the shares he pays the short-term gains tax under the Bill. I should say that he would have done as the Bill stood. Now the tax applies only if the land or the security is purchased after the death and the shares disposed of within six months or three years, as the case may be. The Amendment meets my point absolutely and I am grateful to my hon. Friend for having introduced it.

Mr. Callaghan: Might I pursue this matter a little further to make sure that I understood what the Financial Secretary has in mind? If it is what I think it is, I am against the Amendment. Perhaps I could put it in a way different


from that put by the Financial Secretary to see how far I understood his argument. Under the proposed Amendment, if shares are handed on to a legatee as a result of a death, then the land which has been purchased before the death would not be liable to the speculative gains tax. Is that correct?

Sir E. Boyle: Not quite.

Mr. Callaghan: Why?

Sir E. Boyle: It is nearly right. I will speak more slowly this time so that the hon. Member for Cardiff, South-East (Mr. Callaghan) might more easily understand the argument. We all appreciate the difficulty we are in, particularly those, like myself, who are not members of the legal profession. When one is calculating under the Clause the charge on a legatee which arises out of a disposal of inherited shares in a landowning company—which is what we are considering by the Amendment—the purpose of the Amendment is to leave out of account any land acquired by a company before the death which gave rise to the legacy.

Mr. Callaghan: I think I was about 80 per cent. right. But why is the Financial Secretary's argument correct? Why should not land which has been purchased and sold in this way—within a period of three years—bear the speculative gains tax in exactly the same way as any other parcel of land purchased and sold? It has attracted a profit. I am not arguing whether that it good or bad. No one is going to argue that the recipient of the shares is worse off. He is obviously better off. Why should he not make his contribution? In the absence of an explanation as distinct from a definition, I am opposed to the Amendment.

Mr. Graham Page: Surely the unfairness of the transaction in this case is that the value of the land purchased before the death would be reflected in the value of the shares which the legatee inherits. He therefore pays Estate Duty on that value. He may then dispose of the shares after the death. He is then paying the capital gains tax on something on which he has already paid Estate Duty. That is the unfairness as

it would be if this Clause were to remain as it is.

Mr. Callaghan: The legatee does not pay Estate Duty.

Mr. Page: It comes out of his share if he is residuary legatee. It is paid out of the estate. That is why I think I am right in saying that it is unfair when the legatee is a residuary legatee. It may have no effect when he is a specific legatee.

Mr. Callaghan: Is this limited to residuary legatees or to all legatees?

Sir E. Boyle: It is not so limited. My answer would be this. To some extent I think that I disagree with both the hon. Member for Cardiff, South-East and my hon. Friend the Member for Crosby. On the one hand, I must say to my hon. Friend the Member for Crosby that I think this is a very unlikely case to arise. It is unlikely that a legatee would have to sell shares which he had inherited in order to meet an Estate Duty problem. On the other hand, there is the narrow point which the hon. Member for Cardiff, South-East raised.
In my view, the Amendment which the Government are suggesting here, while it is not likely to affect more than a minimum number of cases, meets my hon. Friend's point to the extent to which his argument was valid. I agree that this is a narrow point. I will not pretend that the Amendment makes a great deal of difference to Clause 13, or bites in a large number of cases.

Mr. Callaghan: I do not think so, either. I think that it is useful to probe one or two of these Amendments which seem incomprehensible to begin with. I take issue with the hon. Member about the specific legatee. Why should he not pay a speculative gains tax? He bears nothing at all. Perhaps in the case of the residuary legatee it is more arguable; I do not know. I think that I could sustain a case here that the residuary legatee has a liability to contribute to the public purse; but, so far as the specific legatee is concerned, it seems to me there is a clear case why he should bear his proportion of the duty. With respect to the Financial Secretary, lucid though he has been, I do not think that he has been convincing.

Question put, That those words be there inserted:—

The Committee divided: Ayes 220, Noes 158.

Division No. 225.]
AYES
[7.44 p.m.


Agnew, Sir Peter
Grosvenor, Lt.-Col. R. G.
Percival, Ian


Arnery, Rt. Hon. Julian
Gurden, Harold
Peyton, John


Arbuthnot, John
Hamilton, Michael (Wellingborough)
Pickthorn, Sir Kenneth


Ashton, Sir Hubert
Harris, Frederic (Croydon, N.W.)
Pitman, Sir James


Atkins, Humphrey
Harvey, Sir Arthur Vere (Macclesf'd)
Prior, J. M. L.


Balniel, Lord
Harvey, John (Walthamstow, E.)
Profumo, Rt. Hon. John


Barber, Anthony
Hastings, Stephen
Proudfoot, Wilfred


Barlow, Sir John
Hay, John
Pym, Francis


Barter, John
Heald, Rt. Hon. Sir Lionel
Quennell, Miss J. M.


Baxter, Sir Beverley (Southgate)
Henderson, John (Cathcart)
Redmayne, Rt. Hon. Martin


Beamish, Col. Sir Tufton
Hendry, Forbes
Bees, Hugh


Bell, Ronald
Hicks Beach, Maj. W.
Renton, David


Bennett, F. M. (Torquay)
Hiley, Joseph
Ridley, Hon. Nicholas


Bidgood, John C.
Hill, Dr. Rt. Hon. Charles (Luton)
Rippon, Geoffrey


Biffen, John
Hirst, Geoffrey
Roberts, Sir Peter (Hecley)


Bishop, F. P.
Hobson, Sir John
Robson Brown, Sir William


Black, Sir Cyril
Hocking, Philip N.
Rodgers, John (Sevenoaks)


Bossom, Olive
Holland, Philip
Roots, William


Bourne Arton, A.
Hollingworth, John
Ropner, Col. Sir Leonard


Bowen, Roderic (Cardigan)
Hooson, H. E.
St. Clair, M.


Boyle, Sir Edward
Hopkins, Alan
Scott-Hopkins, James


Brewis, John
Hornby, R. P.
Seymour, Leslie


Brooke, Rt. Hon. Henry
Howard, Hon. G. R. (St. Ives)
Sharpies, Richard


Brown, Alan (Tottenham)
Hughes Hallett, Vice-Admiral John
Shaw, M.


Browne, Percy (Torrington)
Hughes-Young, Michael
Shepherd, William


Buck, Antony
Hulbert, Sir Norman
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Bullus, Wing Commander Eric
Iremonger, T. L.
Smithers, Peter


Burden, F. A.
Irvine, Bryant Godman (Rye)
Spearman, Sir Alexander


Campbell, Gordon (Moray &amp; Nairn)
James, David
Stevens, Geoffrey


Carr, Compton (Barons Court)
Jennings, J. C.
Stewart Harold (Stockport, S.)


Carr, Rohert (Mitcham)
Johnson, Eric (Blackley)
Stoddart-Scott, Cot. Sir Malcolm


Cary, Sir Robert
Kerans, Ctlr. J. S.
Storey, Sir Samuel


Chataway, Christopher
Kerby, Capt. Henry
Studholme, Sir Henry


Chichester-Clark, R.
Kirk, Peter
Summers, Sir Spencer


Clark, Henry (Antrim, N.)
Lancaster, Col- C. G.
Talbot, John E.


Cole, Norman
Legge-Bourke, Sir Harry
Tapsell, Peter


Collard, Richard
Lewis, Kenneth (Rutland)
Taylor, Edwin (Bolton, E.)


Cooper, A. E.
Linstead, Sir Hugh
Taylor, Frank (M'ch's't'r, Moss Side)


Cooper-Key, Sir Neill
Litchfield, Capt. John
Taylor, W. J. (Bradford, N.)


Cordeaux, Lt.-Col. J. K.
Lloyd Rt. Hon. Selwyn (Wirral)
Teeling, Sir William


Cordle, John
Longbottom, Charles
Thatcher, Mrs. Margaret


Corfield, F. V.
Longden, Gilbert
Thomas, Leslie (Canterbury)


Costain, A. P.
Loveys, Walter H.
Thompson, Richard (Croydon, S.)


Coulson, Michael
Lubbock, Eric
Thornton-Kemsley, Sir Colin


Critchley, Julian
Mc Adden Sir Stenhen
Tiley, Arthur (Bradford, W.)


Crowder, F. P.
McLaren, Martin
Touche, Rt. Hon. sir Gordon


Curran, Charles
McLean, Neil (Inverness)
Turner, Colin


Currie, C B. H.
Macleod, Rt. Hn. Iain (Enfield, W.)
Turton, Rt. Hon. R, H.


Dance, James
McMaster, Stanley R.
Tweedsmuir, Lady


d'Avigdor-Goldsmid, Sir Henry
Maddan, Martin
Vane, W. M. F.


Deedes, W. F.
Maginnis, John E.
Vaughan-Morgan, Rt. Hon. Sir John


de Ferranti, Basil
Manningham-Buller, Rt. Hn. Sir R.
Vickers, Miss Joan


Digby, Simon Wingfield
Markham, Major Sir Frank
Wade, Donald


Donaldson, Cmdr. C. E. M.
Marlowe, Anthony
Wakefield, Sir Wavell


Doughty, Charles
Marshall, Douglas
Walder, David


Drayson, G. B.
Marten, Neil
Walker, Peter


du Cann, Edward
Mathew, Robert (Honiton)
Walker-Smith, Rt. Hon. Sir Derek


Duncan, Sir James
Matthews, Gordon (Meriden)
Wall, Patrick


Elliot, Capt. Walter (Carshalton)
Mawby, Ray
Ward, Dame Irene


Emmet, Hon. Mrs. Evelyn
Maxwell-Hyslop, R. J.
Webster, David


Errington, Sir Eric
Maydon, Lt.-Cmdr. S. L. C.
Wells, John (Maidstone)


Erroll, Rt. Hon. F. J.
Mills, Stratton
Williams, Dudley (Exeter)


Farey-Jones, F. W.
Morgan, William
Williams, Paul (Sunderland, S.)


Farr, John
Mott-Radclyffe, Sir Charles
Wills, Sir Gerald (Bridgwater)


Finlay, Graeme
Nabarro, Gerald
Wilson, Geoffrey (Truro)


Forrest, George
Neave, Airey
Wise, A. R.


Fraser, Ian (Plymouth, Sutton)
Noble, Michael
Wolrige-Gordon, Patrick


Gardner, Edward
Nugent, Rt. Hon. Sir Richard
Woodhouse, C. M.


Glover, Sir Douglas
Oakshott, Sir Hendrie
Woodnutt, Mark


Glyn, Dr. Alan (Clapham)
Orr, Capt. L. P. S.
Woollam, John


Goodhart, Philip
Osborn, John (Hallam)
Worsley, Marcus


Goodhew, Victor
Page, Graham (Crosby)



Gower, Raymond
Page, John (Harrow, West)
TELLERS FOR THE AYES:


Green, Alan
Pannell, Norman (Kirkdale)
Mr. J. E. B. Hill and Mr. Batsford.



Pearson, Frank (Clitheroe)





NOES


Ainsley, William
Hilton, A. V.
Parker, John


Allaun, Frank (Salford, E.)
Holman, Percy
Paton, John


Allen, Scholefield (Crewe)
Houghton, Douglas
Pearson, Arthur (Pontypridd)


Awbery, Stan
Howell, Charles A. (Perry Barr)
Peart, Frederick


Bacon, Miss Alice
Howell, Denis (Small Heath)
Pentland, Norman


Baxter, William ((Stirlingshire, W.)
Hughes, Emrys (S. Ayrshire)
Prentice, R. E.


Bence, Cyril
Hughes, Hector (Aberdeen, N.)
Price, J. T. (Westhoughton)


Bennett, J. (Glasgow, Bridgeton)
Hunter, A. E.
Probert, Arthur


Benson, Sir George
Hynd, H. (Accrington)
Proctor, W. T.


Blackburn, F.
Hynd, John (Attercliffe)
Pursey, Cmdr. Harry


Boardman, H.
Irvine, A. J. (Edge Hill)
Randall, Harry


Bowden, Rt. Hn H. W.(Leics, S.W.)
Irving, Sydney (Dartford)
Redhead, E. C.


Boyden, James
Janner, Sir Barnett
Roberts, Albert (Normanton)


Braddock, Mrs. E. M.
Jay, Rt. Hon. Douglas
Robertson, John (Paisley)


Bray, J. W.
Jeger, George
Robinson, Kenneth(St. Pancras, N.)


Broughton, Dr. A. D. D.
Johnson, Carol (Lewisham, S.)
Rodgers, W. T. (Stockton)


Butler, Herbert (Hackney, C.)
Jones, Dan (Burnley)
Rogers, G. H. R. (Kensington, N.)


Callaghan, James
Jones, Elwyn (West Ham, S.)
Ross, William


Castle, Mrs. Barbara
Jones, J. Idwal (Wrexham)
Royle, Charles (Salford, West)


Chapman, Donald
Kelley, Richard
Silverman, Sydney (Nelson)


Collick Percv
Key, Rt. Hon. C. W.
Skeffington, Arthur


Corbet, Mrs. Freda
King, Dr. Horace
Slater, Joseph (Sedgefield)


Craddock, George (Bradford. S.)
Lawson, George
Small, William


Cronin, John
Ledger, Ron
Smith, Ellis (Stoke, S.)


Crosland, Anthony
Lever, L. M. (Ardwick)
Sorensen, R. W.


Cullen, Mrs. Alice
Loughlin, Charles
Soskice, Rt. Hon. Sir Frank


Davies, G. Elfed (Rhontlda, E.)
Mabon, Dr. J. Dickson
Spriggs, Leslie


Delargy Huch
McCann, John
Stewart, Michael (Fulham)


Diamond, John
MacColl, James
Stonehouse, John


Dodds Norman
McKay, John (Wallsend)
Stones, William


Driberg Tom
Mackle, John (Enfield, East)
Taverne, D.


Dugdale, Rt. Hon. John
McLeavy, Frank
Taylor, Bernard (Mansfield)


Ede, Rt. Hon. G.
MacPhereon, Malcolm (Stirling)
Thompson, Dr. Alan (Dunfermline)


Edeiman, Maurice
Mallalleu, E. L. (Brigg)
Thornton, Ernest


Edwards, Rt. Hon. Ness (Caerphilly)
Manuel, Archie
Tomney, Frank


Edwards, Robert (Bliston)
Mapp Charles
Warbey, William


Edwards, Walter (Stepney)
Marsh, Richard
Weitzman, David


Fernyhough, E.
Mason, Roy
Wells, Percy (Faversham)


Fitch, Alan
Mendelson, J. J.
Wells, William (Walsall, N.)


Fletcher, Eric
Millan, Bruce
White, Mrs. Eirene


Foot, Michael (Ebliw Vale)
Milne Edward
Wilkins, W. A.


Fraser, Thomas (Hamilton)
Mitchison, G. R.
Willey, Frederick


Ginsburg, David
Monslow, Walter
Williams, D. J. (Neath)


Gordon Walker, Rt. Hon. P. C.
Moody, A. S.
Williams, LI. (Abertillery)


Griffiths, W. (Exchange)
Morris, John
Williams, W. R. (Openshaw)


Hale, Leslie (Oldham, W.)
Moyle, Arthur
Williams, W. T. (Warrington)


Hall, Rt. Hn. Glenvil (Colne Valley)
Mulley, Frederick
Willis, E. G. (Edinburgh, E.)


Hamilton, William (West Fife)
Neal, Harold
Wilson, Rt. Hon. Harold (Huyton)


Hannan, William
Noel-Baker, Francis (Swindon)
Winterbottom, R. E.


Harper, Joseph
Noel-Baker,Rt.Hn.Philip(Derby,S.)
Woof, Robert


Hayman, F. H.
Oliver, G. H.
Vates, Victor (Ladywood)


Henderson,Rt.Hn.Arthur(Rwly Regis)
Owen, Will



Herbison, Miss Margaret
Paget, R. T.
TELLERS FOR THE NOES:



Pannell, Charles (Leeds, W.)
Mr. Grey and Mr. Ifor Davies

Sir E. Boyle: I beg to move, in page 20, line 14, at the end to insert:
For the purposes of this subsection "value" in relation to a company's land means market value, and the net value of a company's assets is the net value they would have on a sale in the open market of the company's business as a going concern.
This is practically a drafting Amendment, but I will explain it briefly. Under Clause 13 (6) a land-owning company is defined for the purpose of the Clause as a company which is entitled to land to a value equal to or exceeding one-fifth of the net value of all its assets. It has been suggested that the meaning given to the word "value" in subsection (6) is uncertain. It is suggested that it could be said to be book value, or it

might be the value for taxation purposes, or it might be market value. The Amendment accordingly provides that value in relation to a company's land is to mean market value and that the net value of a company's assets is to be the net value which they would have on a sale in the open market of the company's business as a going concern.
The Amendment does not alter the Clause in the slightest nor what everyone has taken to be the plain meaning of the Clause. Its purpose is to make certain that there is no doubt at all as to its meaning.

Mr. Mitchison: This is a meretricious, deceptive, muddled, inconsistent and generally hopeless Government. In


1958, they introduced a Bill which dealt with the market value of land. The then Minister of Housing and Local Government, talking about some Clauses which had been put into the Bill for the purpose of defining market value, said:
Curiously little has been said in the debate about Clauses 3 to 6. These were referred to in a letter in The Times, which some hon. Members have mentioned. The suggestion there was they were altogether too complicated, and that we might cut out the complexities and rely simply on prevailing use value. My hon. Friend the Member for Norwich. South perceived that there were defects in that proposal. The value of land in the open market"—
That seems to be the question here—
depends almost entirely on what can be done with the land. The market, therefore, is concerned more with prevailing future use than with prevailing existing use. If the suggestion in the letter were adopted"—
That, I think, was to keep down the complexities and rely simply on prevailing use value—
it seems to me that if one had a case where land was being bought in an area at present entirely agricultural, but allocated in the development plan for housing, then the prevailing use would be agricultural. If the suggestion in the letter were adopted, the 1947 Act formula would give only agricultural value. That seemed to the Government to be unfair, and the provisions in the Bill would secure housing value. Indeed, these complicated provisions are designed not to put more power into the hands of the Minister, as the letter alleged, but to make as sure as possible that justice is clone to the individual."—[OFFICIAL REPORT, 13th November, 1958; Vol. 595, c. 689.]
Those pregnant words were spoken by the present Chief Secretary to the Treasury on six highly complicated Clauses which he introduced and which took up a great deal of time both in the House and in Committee. They were simply devoted to getting down to what is the market value of land. Now we have the same right hon. Gentleman, with the assistance of other Treasury Ministers, supporting an Amendment which simply says that value in relation to a company's land means market value.
What, therefore, was all this "hot air" about when we were kept day after day talking about the market value of land and planning assumptions? Why could the Government not have said then what is said in this Amendment, that the value of land is market value? I think now, as

I thought then, that is was sufficient to the purpose. Is there some difference between the attitude of the Treasury and that of the Ministry of Housing and Local Government? Have the Government changed their minds? Do planning assumptions no longer matter? Why are they so lucid and clear when it comes to statements of what value means in relation to company land when we had all that wasted time and fuss and bother when we were defining land value for the purpose of compensation for compulsory purchase? As I say, this is a somewhat fraudulent, meretricious, confused and incompetent Government.

Mr. Ede: While agreeing with my hon. and learned Friend the Member for Kettering (Mr. Mitchison), I should like to point out that at last the Government have come down on the side of defining something which they resisted doing for a considerable time. The Financial Secretary to the Treasury was not here when we had that discussion in which the right hon. and learned Attorney-General played a major and distinguished part. Could the Attorney-General tell me why it is easier and appropriate to define the market value of land than it is to define those things which we were discussing earlier this evening? It is quite clear that my hon. and learned Friend the Member for Kettering has correctly sized up the many iniquities of the Government, but for one evening at least they might have arranged to be consistent.

Mr. Mitchison: I earnestly hope that we shall have an answer to the questions put by my hon. Friend the Member for South Shields (Mr. Ede) even if the vulgar abuse which I showered on the head of the Government, which they richly deserved, does not appear to merit a riposte.

The Chairman: The Amendment proposed——

8.0 p.m.

Mr. Callaghan: Does this mean that we are not to have a reply? It would be a great shame if we all had to get up in turn in order to try to extract a response from the Government. We are quite ready to give the Financial Secretary time to think of his reply, but I hope that he will give one.
I am glad to see that there is a definition of value in Clause 15, to which we shall come in due course, which says that in relation to any property market value means
the price which the property might reasonably be expected to fetch on a sale in the open market".
I hear one of my hon. Friends mutter behind me that that is what he always thought it meant. I think that he is probably right; that is what most of us thought it meant. However, according to previous Statutes, it does not mean anything quite so simple and definite as that. It means something which has to be wrapped up in about six Sections of an Act.
On balance, I prefer what is in the Finance Bill. I think that it is clear and simple and, although I do not wish to cross swords with the courts, since we are always very careful about that, I think that not even the courts would misconstrue it. But how can the Financial Secretary be so clear in drafting this piece of legislation when such difficulty is found in defining the same thing in other legislation?

Sir E. Boyle: I was not here for all the earlier discussions, but I can say this now in reply. I do not profess to be an expert philosopher, though perhaps something of an amateur enthusiast for the subject, but I know that the word "value" has very many uses and usages in one form or another and exactly what the word "value" means and what job it does in a particular sentence are questions about which many learned men have disputed for generations. I do not think that quite the same is true of the words "commodities" and "futures markets". I will leave it at that.

Mr. E. G. Willis: This is an important matter. The Financial Secretary tries to ride off on a felicitous answer, but he has not, in fact, answered the point raised by my hon. and learned Friend the Member for Kettering (Mr. Mitchison).
In the Town and Country Planning Act, 1958, we took about six Sections to define value for the purposes of compensation, whereas here, apparently, we need only one. I served a long time on the Committee which dealt with the Act

when it was going through Parliament, and I remember that we had long discussions about this matter with learned dissertations on land tenure in Scotland and other factors which had to be taken into account in determining market value.
The question is whether or not these factors have to be taken into account when considering value in connection with Clause 13. Have all these factors which were enumerated in the many provisions of the earlier Act to be taken into account when determining what market value is? We were told then that market value required a great deal of consideration and definition because we were providing for compensation to landowners. This is the point, of course. To ensure that the landowner would be fairly treated, a considerable part of the earlier Act was devoted to the subject.
There is an obligation here, to ensure that we are not being cheated, to see that the same definition and provisos should apply. This is the point which has not been answered. What is the difference? Why are we now confronted with this different definition of the expression "market value"?

Mr. J. T. Price: I am sorry that I had to leave the Chamber for a few minutes in order to eat to sustain my patience in face of so much negative response from the Government on earlier Amendments. I am familiar with the point at issue on this Amendment. I shall not weary the Committee by going into the philosophical implications of the word "value", though the Financial Secretary has tempted me to do so. I might even call in aid Karl Marx, who wrote a very learned book about value, surplus value and all the rest.
What we do know is that land is one of the counters most commonly used by speculators. Land is a more certain winner in the long run than equity shares. When everything is wobbling up and down, land continues on its straight course upwards, and the social consequences of the ever-increasing value of land pain and intrigue many of us, making us long for the day when we can adopt a more rational approach to it than has ever been taken by this Administration or, I may add, even by previous Labour Governments.
The value of land has often been disputed in the House of Commons in more simple connotations than this. For instance, a few years ago, Her Majesty's Government introduced legislation to make local authorities pay the market value for land irrespective of whether it was to be used for housing, for public development or for the social needs of the community. In considering this piece of legislation, we want to know whether we shall have the same safeguards applied to the proper value of land in the taxation on estates and companies as were applied to land sought by public authorities for housing the people.
In this morass of terminology, as I am able to read it, the thing is very vague and indeterminate. For instance, considering the value of land on realisation of an estate, we have to take other things into account, apart from the market value of the land, to make a properly balanced equitable solution. I will put to the hon. Gentleman a question he should answer. He is fair minded enough to answer it if he can or, at least, to make an attempt. There may be parcels of land in an estate which is being subjected to taxation in the way intended by the Clause which have been refused a development certificate by a planning authority. Because they have been refused a development certificate, the planning authority has had to pay compensation to the owners of the land. This is built into the property of the people owning the land, irrespective of what the market value of the land is at the time of break-up.
It is not good enough to palm off the Amendment in a casual way. The hon. Gentleman should not try to persuade some of us, who are fairly hard-headed, that there is nothing much in it and that it is all innocuous. The one sacred form of property in Britain and most other developed countries is land. People interested in property are more interested in the inviolability of land than in other forms of property. I make no apology for being perhaps a bit old-fashioned about this, after the style of some of our worthy forefathers who always regarded land as basic to all, human considerations, value and everything else.

Mr. Mitchison: Ricardo.

Mr. Price: The Mikado? I am speaking of my ancestors, not those of Sun Yat-Sen. [Laughter.] Hon. Members are being most provocative. I am making a perfectly reasonable, short intervention, trying to have these things put right. We are not satisfied to be brushed off with the sort of explanation of value which we have been given because the value of land is very important.
Although the hon. Gentleman was not here for our earlier discussion, and he may feel some embarrassment in trying to deal with the question put to him, I must insist that it is a question which requires a more adequate answer than we have had so far. I feel that the Chancellor of the Exchequer's Amendments should not command support because he has not justified them. He has not put forward an adequate argument to dispose of my hon. Friend's criticism. I hope that we shall record our displeasure at being given this very partial and unsatisfactory explanation of something which is fundamental to the future well-being, of the country.

Sir E. Boyle: The hon. Member for Westhoughton (Mr. J. T. Price), not quite catching the reference to David Ricardo from the Opposition Front. Bench, reminded me a little of the story of Mrs. Hudson, wife of the railway magnate, who, on being shown a bust of Marcus Aurelius, said. "It is not the present marquis, is it?"
The preoccupation of the hon. Member for Edinburgh, East (Mr. Willis) with the definition of market value, with what was said in the Town and Country Planning Act and with what is said in this Bill is making the philosophical error about the essentialist theory of definition. I can refer the hon. Gentleman to a book in the Library which deals with that matter fully.
We all know what is meant. There is surely no ambiguity about what is meant by a sale in the open market of a company's business as a going concern. Those words, which are perfectly clear and straightforward, define what is meant in this Amendment by the "net value of a company's assets". They are not in any way ambiguous. I do not


think that there is anything wrong in the word doing a slightly different job in this Amendment from the job which it did in a major piece of town and country planning legislation.
I hope that, with that explanation, the Committee will feel able to come to a decision on this Amendment.

Amendment agreed to.

Sir E. Boyle: I beg to move, in page 20, line 16, to leave out "one-twentieth" and insert "one-tenth".
We are in the curious position on this Clause of having three consecutive Amendments all dealing with very different subjects, which does not often happen. This Amendment deals with a different matter from the matters with which we have just been dealing. It increases from one-twentieth to one-tenth the proportion of shares in a landowning company which a person has to hold in order to have a substantial interest in the company for the purposes of Clause 13.
Clause 13 charges a person with a substantial interest in a land-owning company under the control of not more than five persons who disposes of shares in the company on the lesser of two things—either the actual profit on the sale of shares, or the due proportion of the chargeable gains which the company would have made on disposing of land acquired by it within three years of the sale of shares.
During the Committee stage, my hon. Friend the Member for Worcester (Mr. Walker) moved an Amendment the object of which was to take out of the scope of Clause 13 a public company whose shares are officially quoted on the Stock Exchange in the United Kingdom and 25 per cent. of which are held by the public. My hon. Friend made the point that if public companies remained within Clause 13 a shareholder who happened to have 5 per cent. of the shares might be liable on a sale of shares even though he did not know that the company was controlled by five or fewer persons. There was the further point that, since shares held by a person's relatives have to be aggregated with his own holding in applying the 5 per cent. tax, the holder of a quite

small block of shares might find himself caught unexpectedly by the Clause.
I said in reply that I thought that it would not be possible to exclude public companies from Clause 13, but that we would look at the Clause from the general policy angle and from the administrative point of view to see whether it had too wide an ambit. There is some force in the view that the Clause as it stands has too wide an ambit and that with the 5 per cent. shareholding test it might catch—again I think that this would happen on only rare occasions—people who had no say in or even knowledge of the conduct of a landowning company's shares.
8.15 p.m.
My right hon. and learned Friend the Chancellor of the Exchequer has therefore decided that it would be better to substitute a 10 per cent. share-holding test. This would clearly exclude members of the public who merely happen to hold some shares in a closely controlled land-owning company. But I do not think that it will give rise to any real risk of letting out operators who are there to exploit the device of selling what is, in effect, an interest in land through the medium of the company. We felt throughout that we did not in any way wish to weaken the main purpose of the Clause. Whatever may be the difference in the Committee as to what the scope of the test should be, I am sure that a Clause of this kind is necessary, and we do not want to weaken its purpose. However, I think that there was something in my hon. Friend's point that the ambit of the Clause was too wide in its original form, and that is why we have tabled the Amendment.

Mr. Peter Walker: I am grateful to my hon. Friend the Financial Secretary for in some way improving the provisions of the Clause, but I should like to repeat what I said in Committee, namely, that, while in favour of using the Clause to catch the person who decides to dispose of property and land by means of shares and thus avoid the provisions of the speculative gains tax as they apply to land, I do not think that any hon. Member wishes to introduce a Clause which results in a difficult administrative position concerning public companies with a London Stock


Exchange quotation and people selling shares in the normal way.
Even with the Amendment, it is impossible for an individual to know two things about the company. The first is whether the company is in the control of five persons and the second is whether he, together with relatives, associates and friends, has 10 per cent. or more of the shares. For example, if a person's brother, mother or father purchased some shares separately, there is no way by which an individual can ascertain whether 10 per cent. of the shares are owned in this way. What is more, I cannot see how the Treasury can ascertain this fact. It is not possible to look at the share register of a company to discover whether five people have more than 50 per cent. of the equity nor whether one person, together with friends and relatives, has 10 per cent. of the equity. Frequently, the shares will be in the name of a nominee company or in the name of a bank.
I would point out this further complication. If we discover that a person has 11 per cent. of the shares in such a company, how are we to apply the test? Are we to say in respect of one of the larger companies with a Stock Exchange quotation that we want to know whenever a person sells some shares and that we shall check exactly what is the percentage shareholding of that person? Having checked on that and having discovered that that person owns more than 10 per cent., we shall then presumably ask the company to value its assets and any land which it has purchased in the past three years and work out the proportion of the sale which is taxable under the Clause. This would be almost an administrative impossibility.
I should like my hon. Friend to tell me what will be the position of a person owning 11 per cent. of the equity of such a company who decides on a certain date to sell 2 per cent. of his shares, thus leaving him with 9 per cent., and who a month later decides to dispose of 9 per cent. of the whole. Will he be taxed on the 2 per cent. and not on the 9 per cent., or will he be taxed on the 11 per cent. if he makes a sale in any one year? If so, people will decide to sell 9 per cent. of their shares in one year and to wait a month or two until the next

financial year and then dispose of another 9 per cent.
If we endeavour to capture the operator who uses this method of the sale of shares to make a profit on land, I suggest that a percentage such as 10 per cent. in a public company with a Stock Exchange quotation, with all the complexities which I have mentioned, will not have the effect of catching such an operator.
If a person has purchased a large amount of land within the medium of a public company with a Stock Exchange quotation and he wants to make a profit by selling those shares and he is, therefore, a substantial holder, under a provision by which he is allowed, for example, 30 per cent., if he disposed of that amount and made a profit on it this provision would not apply to the other 70 per cent. of the property deal. It would obviously not be worth his while. It would be much more worth his while to hold on to the entire deal for three years and then to have it completely free of taxation rather than to dispose of the 10 per cent. in this way. Thus an operator will be driven to do a three-year deal in another company in which he owns 100 per cent. of the shares.
I should like to know the position regarding this percentage in respect of a shareholding in the form of a debenture. I ask this in the interest of the institutions. Many insurance companies and pension funds have substantial debentures which they have issued against property companies. Some of these are convertible debentures. Therefore, the price of a convertible debenture at any one time reflects the amount of property transactions which have taken place during the past three years.
If a property development company has during the last three years embarked upon a substantial purchase of land, the price of the convertible debenture will reflect these purchases. Is the convertible debenture taken as part of the entire equity of the company in calculating the 11 per cent.? How will the difference between the ordinary shares and the convertible debenture be apportioned?
I am grateful for the improvement which the Amendment makes, but my criticism of the Clause as amended is that it taxes people in a way which they could never discover——

The Chairman: Order. The hon. Member is worrying me a little when he talks about the Clause. We are dealing with one Amendment to the Clause, and no more.

Mr. Walker: I apologise, Sir William. I conclude by suggesting that it would have been far better, rather than move the Amendment to increase the percentage to 10 per cent., if some provision had been made whereby the Stock Exchange would regulate the companies with a Stock Exchange quotation so that they could have been left out of this provision.

Sir Cyril Black: I wish to put one question to my hon. Friend the Financial Secretary on which, perhaps, he can give the Committee an answer when he replies. The Amendment relates to Clause 13, which is part of a much larger scheme. Does the reference to the holder of the one-tenth interest in a company as provided by the Amendment cover merely persons and companies resident in the United Kingdom or does the exclusion, which I believe to be a general exclusion, in Clause 9 (1) in favour of persons and companies not resident or ordinarily resident in the United Kingdom also apply to the Amendment?

Sir E. Boyle: I know quite well that my hon. Friend the Member for Worcester (Mr. Walker) and a number of my hon. Friends who, if time had permitted, would have liked to take part in the debate are anxious about the working of the Clause. If one looks at our tax law, I think that there will be found a number of provisions that are to some extent analogous to the Clause as we now have it and which work well. We shall, of course, watch the administration of this procedure and if by chance we find that certain provisions in this or any other Clause are not working satisfactorily, naturally we should regard ourselves as bound to bring fresh legislation before the House another year.
It would be unrealistic to suppose that we can get this new speculative gains tax 100 per cent. right in the very first Finance Bill in which it is introduced. The most we can do is to keep a fair balance as far as we can, as we conceive it to be, between individuals and the

general public interest. In answer further to my hon. Friend, I am told that a person's liability under Clause 13 is based on his holding of shares in the company, and not debentures.
My hon. Friend the Member for Wimbledon (Sir C. Black) is perfectly right in what he has said about the relevance of residence in connection with the point which he has rasied. If he is not right, I will write to him afterwards. At first sight, however, I should have thought that what he said was correct. As you have said, Sir William, we are dealing with a narrow point and a specific Amendment. Although I recognise the anxieties that my hon. Friend the Member for Worcester and others feel on this matter, I hope that my hon. Friend will at least feel that the Amendment has gone some way towards meeting the points which he raised in Committee.

Mr. Callaghan: I hope that the hon. Member for Worcester (Mr. Walker) is satisfied with the reply which he has received. I have a sincere admiration for the Financial Secretary, but when, in three speeches, I hear him fall back upon his philosophical arguments twice, I know that he is not much at home with the Clauses that we are discussing. Having heard the hon. Gentleman in his brilliant moods, I know very well this evening that he is scratching for runs.
The hon. Member for Worcester made an almost unanswerable case, to which he has had no answer, concerning the administrative complications which he could foresee. To pick up the simplest of them—the case of a man with an 11 per cent. holding who, presumably, can evade the whole of this procedure, as the hon. Member for Worcester said, by selling 2 per cent. one year and 9 per cent. later on—why should he not, as the hon. Member said, so enfold the transaction that it is done in a period beyond three years?
I agree that with a new tax like this one, we cannot get it 100 per cent, right, but that is no reason to write legislative rubbish into the Statute. The Financial Secretary has a duty to give the Committee an indication that the Board of Inland Revenue believes that this arrangement is administratively feasible. He owes that to the hon. Member who


raised the matter as well as to the Committee as a whole. I am quite ready to see that he has the opportunity of telling us whether the Board of Inland Revenue thinks that it can administer this provision. I do not see why the Committee should part with the Amendment until we are certain that there are answers, even if not completely watertight, to the questions asked by the hon. Member for Worcester.
When I looked at the Amendment, I went in the other direction from the hon. Member for Worcester. I said that it was easing the situation. If the Board of Inland Revenue, in the first place, thought that 5 per cent. was right, why should it now seek to make it 10 per cent., which, presumably, allows more people to escape the speculative gains tax net? Goodness knows, it is full enough of holes without making it easier. Therefore, when I read the Amendment, my inclination was to oppose it purely on the ground that even more people would slip through.
Whilst I accept the administrative criticisms by the hon. Member for Worcester about the way that the tax will be collected, if there is a landowning company or a company which controls a land-owning company, which must by definition be within the control of five people or less, it seems to me extremely unlikely that one of the shareholders will not know what the other four people are doing.

8.30 p.m.

Mr. Walker: While I appreciate that, the point is that the person with the 10 per cent. holding does not have to be one of the five who control the company.

Mr. Callaghan: I follow that. I suppose, therefore, that a case could arise in which that person did not know what was happening. On the other hand, if we legislate for what is likely to take place, most of the land-owning companies are not in that category but consist of groups of people who own the shares. I take it that mostly the directors are the shareholders and the shareholders are the directors. Is that not so?

Mr. Walker: I am completely in favour of the Clause in respect of the normal land-owning company operating in this way. But this is not true of the

large public companies with a Stock Exchange quotation. In that case there may well be a person who originally floated the company and had 55 per cent. of the shares, over the years disposed of 10 per cent. and was left with 45 per cent., and then started buying some more. Then none of the institutions which invest in the company will know at any particular moment whether the man and his friends own more than 50 per cent. and come within this tax provision.

Mr. Callaghan: I see the point. What figure, then, would be right? Where does one come to the point where it is reasonable to say on the basis of the hon. Member's argument that one ought to be chargeable?

Mr. Walker: My argument was that the Treasury should endeavour to obtain an agreement with the London Stock Exchange that any property company operating in that way and selling shares in order to realise land purchased within a three-year period should lose their quotation on the Stock Exchange. In that way we could stop it.

Mr. Callaghan: I follow the point. I think that I am still against the Government's Amendment, but I hope that the Financial Secretary will now say something to us about the administrative provisions.

Mr. Ede: I wish to raise a point about the reply given by the Financial Secretary to the hon. Member for Wimbledon (Sir C. Black). The Financial Secretary said that if he found he had given his hon. Friend an answer that was not quite correct he would write to him.
Is this a Money Bill or not? I do not know whether the Attorney-General would be willing to advise us on that point at this moment without consideration. A good many Finance Bills have not been Money Bills; a Money Bill is one that is certified by Mr. Speaker when it passes from this House to another place as being a Money Bill. Very often there is so much machinery in the Finance Bill that the certificate is not given. If this is a Money Bill, no matter how wrong the Financial Secretary may have been in his answer to the hon. Member for Wimbledon, after tonight he can do nothing about it, because when the Bill goes from this House


to another place it has to be passed by the other place within a month from the date it received it. Whether the certificate is given or not, it has been general practice for the other place to regard it as a Money Bill and pass it within the month.
Let us suppose—I ask even the Financial Secretary to suppose—that the reply given by the hon. Gentleman to the hon. Member for Wimbledon is not completely accurate. If, when he consults someone else who has to advise him, the Financial Secretary finds that his answer was not completely accurate, what steps does he propose to take to put the matter right? We have talked light-heartedly about revising this legislation in future years if we find that it does not entirely fit. If, tonight, the Financial Secretary is not sure that he has given the right answer to his hon. Friend, what steps can he take to ensure that we shall have on the Statute Book an Act of Parliament which meets the point raised by the hon. Member for Wimbledon?

Sir E. Boyle: I should like to answer one or two of the further points which have been raised. First, I am sorry that I did not deal with one matter raised by my hon. Friend the Member for Worcester (Mr. Walker) in his opening speech. Clause 13 applies where a person disposes of shares in a company and immediately before the disposal—this is the answer to my hon. Friend—that company is one in which he has a substantial interest as defined in subsection (7) of the Clause.

Mr. Walker: If that is correct, surely I am right in saying that a person who owns 11 per cent. of the shares can one day sell 2 per cent. of them and pay tax on that and next day sell the other 9 per cent. and not pay tax on that?

Sir E. Boyle: The test is what the person's interest was in the company immediately before disposal.
In further amplification of what I said about the administrative aspect, it is the belief of the Government—and they are responsible for the Clause—that it will operate. Nothing I said in my earlier remarks was intended to imply that the Clause would not be administratively possible. What I was

saying was that because of the anxiety which I know is felt by some of my hon. Friends on this point, we will, naturally, watch it with particular care. I said that when one is bringing in a new form of taxation, one clearly has to consider with especial care how it works out from the administrative point of view during the year. I meant no more than that.

Mr. Callaghan: The Financial Secretary has now been asked three times—twice by his hon. Friend the Member for Worcester (Mr. Walker) and once by me —what the answer is to the question about the holder of the shares.

Sir E. Boyle: I may have been occasionally obscure to the Committee, but I think that my answer showed clearly that my hon. Friend's interpretation was right, because the test is what the interest of the person concerned was in the company immediately before the disposal.

Mr. Callaghan: In that case, how is the Clause administratively workable?

Sir E. Boyle: I really cannot see that the Clause should not be workable, granted the interpretation of subsection (7) which I have given the Committee.
On the point as to whether the Amendment is not going too far in mitigating the effect of the Clause, I would say that we have here to keep a balance between two things. On the one hand, we do not want the Clause to be drafted in such a way that it would catch—even if it happened only very rarely—people who had no say in or knowledge of the conduct of a land-owing company's affairs. On the other, it would equally be a bad thing if we relaxed the Clause and the subsection in such a way as to give a real risk of letting out those who were out to exploit the device of selling what is, in effect, an interest in land simply through the medium of the company. It must be a matter of judgment as to whether the Amendment from this point of view improves the Clause.
It is my belief that we have got the Clause in a better form than it was before and we have moved in this respect a shade nearer my hon. Friend the Member for Worcester, though the fact that both the hon. Member for Cardiff, South-East (Mr. Callaghan) and my hon. Friend the Member for Worcester to


some extent are still dissenters from the legislation as we have it now might conceivably suggest that the Government have not got it altogether wrong and that we have found something like a middle position.

Mr. Mitchison: I should like to follow up the consequences of that remark. Does it follow that the more dissatisfaction the Government can arouse among their own supporters the more right they will be?

Sir E. Boyle: No. I would not necessarily commit myself to that. What I would say is that an Amendment which strikes the hon. Member for Cardiff, South-East as too generous, and which improves the Clause from the point of view of my hon. Friend the Member for Worcester, though still leaving both dissatisfied with it, is a combination of circumstances which suggests to me that the Government might possibly have got the Clause not too wrong, possibly got it about right.
In reply to the right hon. Member for South Shields (Mr. Ede), my hon. Friend the Member for Wimbledon (Sir C. Black) asked me a question which related not merely to this Clause but to another. I gave what I thought was the correct

answer on the spur of the moment. I think that it has been known for that to be done during Committee stages before. If I am proved to be wrong, I will notify not only my hon. Friend, but will take the first opportunity of notifying the House. But I am bound to say that I have known Ministers asked questions and using that form of words.

Mr. J. T. Price: Before the Financial Secretary gets on to an easier pitch than this, perhaps I can assist him to make a dignified withdrawal if he will answer this question. How will he deal administratively with the hybrid company, the company with assets partly in land and partly in industrial interests? How will he deal with the 10 per cent. in that case? If this is provided for in the Bill, I will put up my hands, but at the moment I cannot understand how this principle is to be applied to the hybrid company.

Sir E. Boyle: I do not quite see how that applies to this Amendment and I am not quite sure that it applies to the Clause.

Question put, That "one-twentieth" stand part of the Clause:

The Committee divided: Ayes 167, Noes 230.

Division No. 226.]
AYES
[8.43 p.m.


Ainsley, William
Edelman, Maurice
Janner, Sir Barnett


Allaun, Frank (Salford, E.)
Edwards, Rt. Hon. Ness (Caerphilly)
Jay, Rt. Hon. Douglas


Allen, Scholefield (Crewe)
Edwards, Robert (Bilston)
Jeger, George


Awbory, Stan
Edwards, Walter (Stepney)
Jenkins, Roy (Stechford)


Bacon, Miss Alice
Evans, Albert
Johnson, Carol (Lewisham, S.)


Baxter,William (Stirlingshire, W.)
Fernyhough, E.
Jones, Dan (Burnley)


Bence, Cyril
Fitch, Alan
Jones, Elwyn (West Ham, S.)


Bennett, J. (Glasgow, Bridgeton)
Fletcher, Eric
Jones, J. Idwal (Wrexham)


Benson, Sir George
Foot, Michael (Ebbw Vale)
Jones, T. W, (Merioneth)


Blackburn, F.
Fraser, Thomas (Hamilton)
Kelley, Richard


Blyton, William
Ginsburg, David
Key, Rt. Hon. C. W.


Boardman, H.
Gordon Walker, Rt. Hon. P. C.
King, Dr. Horace


Bowden, Rt. Hn. H. W. (Leics.S.W.)
Greenwood, Anthony
Lawson, George


Bowen, Roderic (Cardigan)
Grey, Charles
Ledger, Ron


Boyden, James
Griffiths, David (Rother Valley)
Lever, L. M. (Ardwick)


Braddock, Mrs. E. M.
Griffiths, W. (Exchange)
Lewis, Arthur (West Ham, N.)


Bray, J. W.
Hale, Leslie (Oldham, W.)
Loughlin, Charles


Butler, Herbert (Hackney, C.)
Hall, Rt.Hn, Glenvil (Colne Valley)
Mabon, Dr. J. Dickson


Callaghan, James
Hamilton, William (West Fife)
MacColl, James


Castle, Mrs. Barbara
Hannan, William
McKay, John (Wallsend)


Chapman, Donald
Harper, Joseph
McLeavy, Frank


Collick Percy
Hayman, F. H.
MacPherson, Malcolm (Stirling)


Corbet, Mrs. Freda
Henderson, Rt.Hn.Arthur(Rwly Regis)
Mallalleu, E. L. (Brigg)


Craddock, George (Bradford, S.)
Herbison, Miss Margaret
Manuel, Archie


Cronin, John
Hilton, A. V.
Mapp, Charles


Crosland, Anthony
Holman, Percy
Marsh, Richard


Cullen, Mrs. Alice
Hooson, H. E.
Mason, Roy


Darling, George
Houghton, Douglas
Mendelson, J. J.


Davies, G. EllccI (Rhondda, E.)
Howell, Denis (Small Heath)
Millan, Bruce


Davies, Ifor (Gower)
Hughes, Emrys (S. Ayrshire)
Milne, Edward


Delargy, Hugh
Hughes, Hector (Aberdeen, N.)
Mitchison, G. R.


Diamond, John
Hunter, A. E.
Monslow, Walter


Dodds, Norman
Hynd, H. (Accrington)
Moody, A. S.


Ougdale, Rt. Hon. John
Hynd, John (Attercliffe)
Morris, John


Ede, Rt. Hon. C.
Irvine, A. J. (Edge Hill)
Moyle, Arthur



Irving, Sydney (Dartford)
Mulley, Frederick




Neal, Harold
Robertson, John (Paisley)
Thornton, Ernest


Noel-Baker, Francis (Swlndon)
Robinson, Kenneth (St. Pancras, N.)
Tomney, Frank


Noel-Baker,Rt.Hn.Philip(Derby,S.)
Rodgers, W. T. (Stockton)
Wade, Donald


Oliver, G. H.
Rogers, C. H. R. (Kensington, N.)
Warbey, William


Owen, Will
Ross, William
Weitzman, David


Paget, B. T.
Royle, Charles (Salford, West)
Wells, Percy (Faversham)


Pannell, Charles (Leeds, W.)
Short, Edward
Wells, William (Walsall, N.)


Pargiter, G. A.
Silverman, Sydney (Nelson)
White, Mrs. Eirene


Parker, John
Skeffington, Arthur
Wllkins, W. A.


Paton, John
Slater, Joseph (Sedgetield)
Willey, Frederick


Pearson, Arthur (Pontypridd)
Small, William
Williams, D. J. (Neath)


Peart, Frederick
Smith, Ellis (Stoke, S.)
Williams, LI. (Abertillery)


Pentland, Norman
Sorensen, R. W.
Williams, W. R. (Openshaw)


Prentice, R. E.
Soskice, Rt. Hon. Sir Frank
Williams, W. T. (Warrington)


Price, J. T. (Westhoughton)
Spriggs, Leslie
Willis, E. G. (Edinburgh, E.)


Probert, Arthur
Stewart, Michael (Fulham)
Winterbottom, R. E.


Pursey, Cmdr. Harry
Stonehouse, John
Woof, Robert


Randall, Harry
Stones, William
Yates, Victor (Ladywood)


Rankin, John
Taverne, D.



Redhead, E. C.
Taylor, Bernard (Mansfield)
TELLERS FOR THE AYES:


Roberts, Albert (Normanton)
Thompson, Dr. Alan (Dunfermline)
Mr. Charles A. Howell and




Mr. McCann.




NOES


Agnew, Sir Peter
Errington, Sir Eric
Lloyd, Rt. Hon. Selwyn (Wirral)


Arbuthnot, John
Erroll, Rt. Hon. F. J.
Longbottom, Charles


Atkins, Humphrey
Farey-Jones, F. W.
Longden, Gilbert


Balniel, Lord
Farr, John
Loveys, Walter H.


Barber, Anthony
Finlay, Graeme
Lucas-Tooth, Sir Hugh


Barlow, sir John
Fisher, Nigel
McAdden, Sir Stephen


Barter, John
Forrest, George
Maclean, Sir Fitzroy(Bute&amp;N.Ayre.)


Batsford, Brian
Fraser, Hn. Hugh (Stafford &amp; Stone)
Macleod, Rt. Hn. Iain (Enfield, W.)


Baxter, Sir Beverley (Southgate)
Fraser, Ian (Plymouth, Sutton)
McMaster, Stanley R.


Bell, Ronald
Gammans, Lady
Macmillan, Maurice (Halifax)


Bennett, F. M. (Torquay)
Gardner, Edward
Macpherson, Niall (Dumfries)


Bidgood, John C.
Gilmour, Sir John
Maddan, Martin


Biffen, John
Glover, Sir Douglas
Maginnis, John E.


Bishop. F P.
Glyn, Dr. Alan (Clapham)
Manningham-Buller, Rt. Hn. Sir R.


Black, Sir Cyril
Goodhart, Philip
Markham, Major Sir Frank


Bossom Clive
Goodhew, Victor
Marshall, Douglas


Bourne-Arton, A.
Gower, Raymond
Marten, Neil


Boyle Sir Edward
Green, Alan
Mathew, Robert (Honiton)


Brewis John
Grosvenor, Lt.-Col. R. G.
Matthews, Gordon (Meriden)


Brooke, Rt. Hon. Henry
Gurden, Harold
Mawby, Ray


Brown Alan (Tottenham)
Hall, John (Wycombe)
Maxwell-Hyslop, R. J.


Browne Percy (Torrington)
Hamilton, Michael (Wellingborough)
Maydon, Lt.-Cmdr. S. L. C.


Buck, Antony
Harris, Frederic (Croydon, N.W.)
Mills, Stratton


Bullard, Denys
Harris, Reader (Heston)
Morgan, William


Bullus, Wing Commander Eric
Harrison, Brian (Maldon)
Mott-Radclyffe, Sir Charles


Burden, F. A.
Harrison, Col. Sir Harwood (Eye)
Nabarro, Gerald


Campbell, Gordon (Moray &amp; Nairn)
Harvey, Sir Arthur Vere (Macclesf'd)
Neave, Airey


Carr, Compton (Barons Court)
Harvey, John (Walthamstow, E.)
Noble, Michael


Carr, Robert (Mitcham)
Hastings, Stephen
Nugent, Rt. Hon. Sir Richard


Cary Sir Robert
Hay, John
Oakshott, Sir Hendrie


Chataway, Christopher
Heald, Rt. Hon. Sir Lionel
Orr-Ewing, C. Ian


Chichester-Clark, R.
Henderson, John (Cathcart)
Osbom, John (Hallam)


Clark, Hendry (Antrim, N.)
Hendry, Forbes
Page, Graham (Crosby)


Cole, Norman
Hiley, Joseph
Page, John (Harrow, West)


Collard, Richard
Hill, Dr. Rt. Hon. Charles (Luton)
Pannell, Norman (Kirkdale)


Cooke, Robert
Hirst, Geoffrey
Pearson, Frank (Clitheroe)


Cooper, A. E.
Hobson, Sir John
Percival, Ian


Cordeaux, Lt.-Col. J. K.
Hocking, Philip N.
Peyton, John


Cordle, John
Holland, Philip
Pickthorn, Sir Kenneth


Corfield, F. V.
Hollingworth, John
Pitman, Sir James


Costain, A. P.
Hopkins, Alan
Pitt, Miss Edith


Coulson, Michael
Hornby, R. P.
Pott, Percivall


Crawley, A. M.
Howard, Hon. G. R. (St. Ives)
Price, David (Eastleigh)


Critchley, Julian
Hughes Hallett, Vice-Admiral John
Prior, J. M. L.


Crowder, F. P.
Hughes-Young, Michael
Profumo, Rt. Hon. John


Curran, Charles
Hulbert, Sir Norman
Proudfood, Wilfred


Currie, G. B. H,
Iremonger, T. L.
Pym, Francis


Dance, James
Irvine, Bryant Godtnan (Rye)
Redmayne, Rt. Hon. Martin


d'Avigdor-Coldsmid, Sir Henry
James, David
Renton, David


Deedes, W. F.
Jennings, J. C.
Ridley, Hon. Nicholas


de Ferranti, Basil
Johnson, Eric (Blackley)
Rippon, Geoffrey


Digby, Simon Wingfield
Kerans, Cdr. J. S.
Roberts, Sir Peter (Heeley)


Donaldson, Cmdr. C. E. M.
Kerby, Capt. Henry
Robson Brown, Sir William


Doughty, Charles
Kershaw, Anthony
Rodgers, John (Sevenoaks)


Drayson, C. B.
Kirk, Peter
Roots, William


du Cann, Edward
Lancaster, Col. C. G.
Ropner, Col. Sir Leonard


Duncan, Sir James
Legge-Bourke, Sir Harry
Royle, Anthony (Richmond, Surrey)


Eccles, Rt. Hon. Sir David
Lewis, Kenneth (Rutland)
St. Clair, M.


Elliot, Capt. Walter (Carshalton)
Lilley, F. J. P.
Scott-Hopkins, James


Emmett, Hon. Mrs. Evelyn
Linstead, Sir Hugh
Seymour, Leslie



Litchfield, Capt. John
Shaw, M.







Shepherd, William
Thomas, Leslie (Canterbury)
Webster, David


Smith, Dudley (Br'ntf'd &amp; Chiswick)
Thompson, Richard (Croytlon, S.)
Wells, John (Maidstone)


Spearman, Sir Alexander
Thornton-Kemsley, Sir Colin
Williams, Dudley (Exeter)


Stanley, Hon. Richard
Tiley, Arthur (Bradford, W.)
Williams, Paul (Sunderland, S.)


Stevens, Geoffrey
Touche, Rt. Hon. Sir Gordon
Wills, Sir Gerald (Bridgwater)


Steward, Harold (Stockport, S.)
Turner, Colin
Wilson, Geoffrey (Truro)


Stoddart-Scott, Col. Sir Malcolm
Turton, Rt. Hon. R. H.
Wise, A. R.


Storey, Sir Samuel
Tweedsmuir, Lady
Wolrige-Gordon, Patrick


Studholme, Sir Henry
Vane, W. M. F.
Woodhouse, C. M.


Summers, Sir Spencer
Vaughan-Morgan, Rt. Hon. Sir John
Woodnutt, Mark


Talbot, John E.
Vickers, Miss Joan
Woollam, John


Tapsell, Peter
Wakefield, Sir Waved
Worsley, Marcus


Taylor, Eldwin (Bolton, E.)
Walder, David
Yates, William (The Wrekin)


Taylor, Frank (M'ch'st'r, Moss Side)
Walker, Peter



Taylor, W. J. (Bradford, N.)
Walker-Smith, Rt. Hon. Sir Derek
TELLERS FOR THE NOES:


Teeling, Sir William
Wall, Patrick
Mr. McLaren and Mr. Rees.


Thatcher, Mrs. Margaret
Ward, Dame Irene

Proposed word there inserted.

Clause, as amended, ordered to stand part of the Bill.

Clause 14.—(CHARITIES, SUPERANNUATION FUNDS, AND OTHER SPECIAL CASES.)

The Attorney-General: I beg to move, in page 21, line 15, at the end 'to insert:
(5) There shall be exempt from tax chargeable under Case VII any gains which accrue to an assurance company (within the meaning of Part XX of the Income Tax Act, 1952) from its acquisition and disposal of investments of its life assurance fund, but which by reason of the mutual nature of the company's business or part of it do not accrue as profits of a trade.
During the Second Reading debate there was some discussion about the position of mutual life insurance companies contrasted with non-mutual or proprietary life insurance companies. In Committee my hon. Friend the Economic Secretary said that we would table Amendments to put the mutual life insurance companies in precisely the same position—so far only as life insurance was concerned—as the proprietary life insurance companies. The Amendment does that.

Mr. Mitchison: That was a very succinct explanation. How complete it was remains to be seen. As I understand it, we are dealing with the life insurance funds of mutual companies, and so far as I know there is no express provision in the Bill about the life insurance funds of non-mutual companies—what I might call ordinary companies. I take it that the reason is that life insurance funds of ordinary companies, treated in accordance with the Act, are taken as separate units of assessment, and are bound to attract what one of my hon. Friends has called the "badge of trade". I suppose that the ordinary

company is accordingly liable to pay tax on the profits its makes from the purchase and sale of investments, and that there is no question of its being dealt with under Case VII. I trust that I am right so far.
Here we have a rather different case. As I understand it, there is no badge of trade in connection with the business of a mutual company, even in connection with the management of its life insurance fund, Consequently, there are no profits of trade, and it is being given a particular exception from tax chargeable under Case VII—that exception which is not necessary and is not given in respect of other life insurance companies because they attract tax by way of the carrying on of a trade.
I should like to know the reason for this. Why is a mutual life insurance company especially exempt on the profit, or margins, whatever we call them, which accrue from the purchase at one price and sale at a higher price? There is no question of motive in this tax. It is. I understand, a tax which falls simply and wholly on profits or margins, whichever word one uses, between purchase and disposal of stocks and shares. These life insurance funds of mutual companies certainly attract margins. We call them profits in this instance because it is connected with the fact of whether they carry on a trade or not. There is no question that there is an increase due to the change in the value of shares, but for some reason or other that increase is not to attract this tax.
I hope that the Attorney-General will make clear not only the meaning of the proposed subsection, but what the object is and why there should be what appears to be wholly exceptional treatment for one group of people. I am


not very sorry for life insurance companies. Later in the Bill we shall consider a case where the Government appear to be in somewhat unsuccessful competition with them in selling Government annuities. I shall not go into that now, but broadly speaking, they do not do too badly.
The reasons for an exemption, I think, can hardly be charitable ones. I trust that we shall be told what they are, bearing in mind that there is no intention in this Bill to tax people because of their intentions or motives but purely on the basis of something acquired and disposed of after a tolerably short interval.

The Attorney-General: I certainly hope that I did not disappoint the Committee in moving the Amendment briefly for the reason that this was the subject of considerable discussion on Second Reading. I dealt with it in winding up that debate and posed the problem which confronted the House with regard to this matter. The Economic Secretary during the Committee stage explained what we were proposing to do and said that we would table an Amendment on Report. This is the Amendment we have tabled to carry that out.
That being so, I did not think that the Committee would want me to cover the ground which has been already covered on two previous occasions when this is merely carrying out a pledge which has been given and was fully explained at the time. If the Committee wishes I shall of course explain it shortly, because I do not think we need spend very much time on it.
The hon. and learned Member was quite right in principle. In the case of a general non-life insurance business the proprietary company's gains on the realisation of investments form part of the profits of its trade which are included under Case I of Schedule D. That being so, no question of liability under Case VII arises in respect of those profits because under Clause 9 (1) the Case VII liability does not apply to gains which accrue as profits of the trade. There are one or two exceptions to the general rule but in those few cases there will be a liability under Case VII for any gains realised within the relevant time limit.
As the hon. and learned Member pointed out, mutual concerns carrying on

general insurance business, since they do not make trading profits, will be within the new charge to tax under Case VII. We are not altering the position in regard to insurance other than life insurance. In life insurance a proprietary life insurance company is theoretically liable to tax under Case I of Schedule D on its profits. A mutual life insurance company is not so liable for the reasons the hon. and learned Member gave. In the case of a proprietary life insurance company's gains on realisation of investments, these fall to be taken into account in computing the Case I profits, but where the Case I charge applies it is by law limited to exclude amounts allocated to policy holders.
9.0 p.m.
There is a further complication here in that the Revenue is entitled to claim tax, as an alternative, on the basis of the company's investment income less its expenses of management, and that, in practice, is how tax is ordinarily claimed, except in the case of companies carrying on industrial life insurance business. Proprietary companies nearly always—I would say almost inevitably—pay tax under this alternative basis for reasons which I need not go into.
A mutual life insurance company. although it is not chargeable under Case I of Schedule D, is, like a proprietary company, liable to tax on its investment income less management expenses. The two types of life insurance companies therefore already suffer the same method of taxation; the same system is applied to them. The effect of the Bill as it stands is to impose a charge to tax on the short-term gains of mutual life insurance companies, to which the gains do not accrue as profits of a trade, but not on those of a proprietary life insurance company, to which the gains do accrue as profits of a trade, even though tax is paid on the alternative basis of investment income less management expenses and there is no Case I assessment on which the gains arc computed.
I have gone through the matter shortly, and I hope that the Committee will not mind. It would be unfair to the mutual life insurance companies to leave the position as it now is under the Bill, for that would discriminate unfairly against the mutual life insurance


companies. It is for that reason that the Amendment is proposed. Its effect will be to put the mutual life insurance companies in the same position as the proprietary life insurance companies, as far as life insurance only is concerned, in relation to Case VII. It seems to me right and fair that as they are dealt with similarly by taxation on their investment income less expenses in both cases, they should receive similar treatment under Case VII, which they do not receive at the moment.

Mr. Mitchison: I am sorry to trouble the Committee again. The position as adumbrated by the right hon. and learned Gentleman—and he did it in some detail at an earlier stage—is true. In the long run it saves a lot of time, in a case of this sort, particularly where the subject matter is very complicated, for the Opposition to wait to discuss it until they see what the Government put on the Notice Paper. That is what we have done in this case.
I am still not satisfied about this. Let me try to explain to the Attorney-General what is troubling me. The opening words of this part of the Bill accept what I will call loosely profits of trade. It is said that the proprietary insurance companies' life profits fall under that head because they are profits of trade. The intention, I understand, is that profits of trade should be chargeable for tax, but in these very peculiar cases these profits are not, in that form at any rate, chargeable to tax at all. The proprietary insurance companies paytax on a basis which does not involve the question whether these profits on investments are or are not profits of trade. They pay tax on a completely different basis.
What is said about the mutual insurance companies—still dealing with life insurance—is that they ought to be treated Like the other insurance companies. In that form I should be disposed to accept the proposition, but the fact is that they are not so treated in many cases. They are treated as not carrying on a trade for many purposes, because they are mutual companies and they benefit by it. Now an exception is being made in their favour in relation to Case VII assessments, these margins or profits between acquisition and dis-

posal. It is being made in a very curious form. It is being made in relation to life assurance.
I am a little puzzled about this. Many of these mutual companies are marine insurance companies. They, too, have funds which they carry on from year to year and in respect of which they presumably have the same position as regards Case VII. There will be acquisitions and disposals. I have in mind bodies like the Shipowners' Association. The right hon. and learned Gentleman will remember the McArthur case about marine insurance.
Why is it being done in only this one case? Why is this exception being made? Why is it not extended to marine insurance? Have the Government thought out the merits of what they propose? If they were treating the two classes of life insurance companies in a similar way, I should see the point, but I am not clear that they are. They are certainly not in cases where the mutual companies carry on business other than life insurance.

The Attorney-General: I said that it was confined to life assurance. Questions of marine insurance do not touch this. I reiterate that the effect of the Amendment is to bring the two types of company into line as regards tax treatment under Case VII. As I pointed out to the hon. and learned Gentleman, dealing solely with the life insurance activities of both sets of company, leaving Case VII on one side, they are both taxed now under the same system —taxation of investment income, less management expenses.
The Revenue has an alternative, if it wishes to use it, of taxing the proprietary companies on the profits of a trade. That being the alternative to the system applied in relation to proprietary companies for life insurance, I think that it would be wrong to make them subject to Case VII, as their liability under the alternative system is higher when it is taxed on the investment income, less management expenses. Therefore, it would be quite wrong to discriminate against mutual life insurance companies—mutual companies in relation to life insurance only—by keeping them within the scope of Case VII.
For that reason, we have tabled the Amendment to bring parity of treatment to the two.

Amendment agreed to.

Sir E. Boyle: I beg to move, in page 21, line 18, at the end to insert:
(6) Where assets of the British Transport Commission are, by virtue of or in accordance with any Act of the present Session providing for the dissolution of that Commission, transferred to any body corporate established by that Act, then—

(a) the Commission shall not be chargeable to tax under Case VII by reference to the transfer in respect of its acquisition and disposal of any asset included in the transfer; and
(b) the body corporate shall be treated as if the Commission's acquisition of the asset had been its acquisition of it (paragraph 16 of the Ninth Schedule to this Act applying for the purposes of this paragraph as it applies for the purposes of that Schedule).
The object of the Amendment is to provide that the British Transport Commission should not be chargeable by reference to the transfer of any of its assets to a successor body proposed to be set up by the Transport Bill, which is at present passing through another place. The Transport Bill provides that all the assets at present belonging to the Commission are to vest in four new boards or in the Holding Company on a vesting date. Under the provisions of the Bill as at present drafted, the new boards or the Holding Company will acquire the assets in question on the vesting date and so would become liable to tax under Case VII if they subsequently disposed of such chargeable assets within the relevant time limit from the vesting date.
For the purposes of Case VII the new boards, if we left the Bill as it is, would be treated as acquiring the assets at their actual market value, if I may use those words once again—that is, the price which the assets might reasonably be expected to fetch on a sale in the open market. In some cases one of the successor boards, on disposing of an asset within the relevant time limit, might find that the asset realised considerably more than its market value at the vesting date, and it would therefore make a gain chargeable under Case VII.
This matter has been drawn to our attention, perfectly fairly, by the British Transport Commission and, of course,

the point is particularly important when one considers assets taken over by the Railways Board, which will be cutting down its activities and may be in a position to sell off redundant land for some profitable form of development for which there is no planning permission in existence at the vesting date.
The Amendment therefore provides—and I think that this is clearly reasonable—that transfers from the Commission to the successor boards should not give rise to Case VII liability; and that the successor boards to the Commission should be treated, in regard to the assets transferred to them from the Commission, as if the Commission's acquisition of the assets had been the successor boards' acquisition.
That seems to me to be entirely reasonable. The Transport Bill was introduced to this House months before these present proposals. I think that it has always been accepted by the House that, however much we may disagree about the Transport Bill and the Government's proposals with regard to the British Transport Commission, none the less, if the Bill is coming forward, the new successor boards must have a fair chance to do their work as well as possible.
In the circumstances of both the Transport Bill and this Finance Bill, I think that it would only be reasonable to use the machinery of Clause 14 for the purpose that I have outlined to the Committee; and to say that we should proceed as if the Commission's acquisition of the assets had been the acquisition by the successor boards. While with any subject concerning transport we are clearly on the verge of controversy, I would hope that the principle behind the Amendment was one that would commend itself to the Committee.

Mr. J. T. Price: Whilst I accept the Financial Secretary's statement, one or two comments ought to be made about the relationship of this Clause to the newly-defined activities of the British Transport Commission and its successors. It is true, as the hon. Gentleman says that the purpose of the Transport Bill, which is still passing through another place, is to create a Holding Company which will become the receptacle or residuary of all the Commission's investments and assets—other


than railways, canals and docks, which are to be hived off to three separate organisations.
It is important, however, to point out that within the province of that Holding Company will come all the remaining assets of British Road Services and its subsidiaries; all the assets of a large number of bus undertakings in which the State has a more than majority share interest—a sort of mixed bag of private and public enterprise. Included in it are such organisations as Thomas Cook & Son, Ltd., Tillings, and a large number of other diverse bodies that are not generally recognised as nationalised bodies at all.
One of the things that has borne seriously on the consideration of my hon. Friends and myself in Standing Committee has been that a large body of investments in these bus undertakings, road transport undertakings and administrative services of the Commission will now come within the province of a Holding Company which is purely an administrative body, disconnected altogether from the functional activities of the companies to be taken over. What some of us fear is that, under the new dispensation, it may be much easier for many of these profitable elements of the Commision, which have been making some contribution to the coffers of the Commission generally, to be placed at a disadvantage when it comes to selling them.
9.15 p.m.
The Financial Secretary just said, in effect, that if the B.T.C. wishes to sell some of its land —land for which it has not found a good use under its truncated stature—at site values then the Clause will mean that the Commission will not be caught in the net and again penalised by having to pay the capital gains tax for realising on its assets. I hope that I have not misinterpreted the hon. Gentleman's words in putting it that way.
My hon. Friends and I are concerned that under this set-up, even though the B.T.C. may be excused the operation of the capital gains tax, a situation should not be created whereby there is a greater temptation, even greater than now, to sell publicly owned assets to speculators outside who have nothing but a penal interest in them. We cannot just say, "Thank you very much" to the Govern-

ment for what is, after all, a minor concession when we fear that there may be created a situation in which it will be easier to dispose of nationalised property into the hands of other operators who have greedy eyes to see what is a good thing.
It has been revealed in our discussions upstairs that in many of the great road transport undertakings, including bus companies the West Yorkshire organisation and others, though I will not detail them all—there is a majority holding by the B.T.C. We are fearful that once we get this situation, coupled with the Clause, we may find that ultimately many of these holdings, which have been profitable to the public purse, will be disposed of in a way not in the public interest.
I am sure that my hon. Friends would not like this opportunity to pass, while thanking the Financial Secretary for the consideration embodied in the Clause, without drawing attention to the wider implications which I have detailed; that we may find that while we get this tax concession we may create a situation in which we shall lose assets in a way which will not be to the advantage of the country or the B.T.C.

Mr. Mitchison: I share the view of my hon. Friend the Member for Westhougton (Mr. J. T. Price) that the body that matters in this connection is the Holding Company. I do not think that the other bodies concerned are treated in any way but fairly. I also share his apprehension that if a concession of this sort is made it tends to facilitate the disposal of the bus companies and other interests which are very substantial in value and which comprise the holdings of the Holding Company.
As the Financial Secretary will he aware, there are substantial minority interests in practically all these cases. They are really almost on a half-and-half basis and the present position is that the profits of these companies, which are the assets of the holding company, go to the Treasury. They have been taken from the railway system which used to get them—to the extent of the railway holdings, say, half the profits—and the position is, from the Government's point of view, that the sale of these assets will mean a loss of a certain


amount of income which may result in some considerable capital profit over the value at the time of transfer from the Commission. The other interests—that is to say, those of the bus proprietors—are in this position, that this is a transfer forced upon them so far as the Transport Bill is concerned, but they, too, may get some profit out of it.
I see the Treasury's point about this, but I am not at all happy about this Clause. The overriding consideration seems to me to be not to separate the Holding Company's assets—that is to say, the bus companies—from the rest of the transport system, and I think it would be a bad thing if those assets were sold off to private operators before we have had a chance of getting something more like an integrated transport system.
The result of this fiscal Measure seems to me, to the extent that it operates at all, to be an inducement towards the sale of the assets rather than their retention in the hands of the Holding Company. I hope that I have made my meaning clear. I quite agree that the assets of the Transport Commission that are handed over are handed over to the Holding Company itself, but they are the assets which will finally be sold by the Holding Company. Therefore. I think they are affected by this Clause, if I understand it correctly.
I express that anxiety in the matter and I notice that it is shared by my hon. Friend the Member for Westhoughton, who has had considerable experience of the Transport Bill in its difficult course through Committee. I am the less happy about it because one of the features of the Bill is that the value of the different properties concerned, the assets of the Transport Commission, can be varied quite considerably by the somewhat excessive—if I may use the word—administrative powers which the Minister of Transport has taken to himself for the purposes of the Bill.

Mr. Willis: I had not intended to intervene, but I thought that the Financial Secretary might have been able to say something which might have given us on this side of the Committee a little reassurance. I believe that the points which have been made by my hon. Friends express the genuine concern, held by a great number of people about this Clause, that it might be paving the

way for further denationalisation of very valuable assets, as well as the point about other people benefiting as a result. These are very real fears and there is no doubt that the Clause has the effect which has been indicated.
I should have thought the hon. Gentleman might have been able to say something about this. We are placed in a difficulty because of the burden which is placed on the Transport Commission in view of the Bill which is at present passing through the House. At the same time, the fears to which I have referred are created and I should like the hon. Gentleman to reassure my hon. Friends.

Sir E. Boyle: Certainly. I did not rise, because I had the impression that the hon. and learned Member for Kettering (Mr. Mitchison) and the hon. Member for Westhoughton (Mr. J. T. Price) wished the Government to be more in the rôle of listener than speaker while they were making their points.
I certainly can give this assurance. This Amendment, which, after all, has a limited scope, will apply to a period of more than six months. It has a limited ambit. I can give an assurance that this Amendment will not act as an incentive to the Holding Company, or indeed to any other successor bodies, to sell off or dispose of its property. We are simply on the fairly narrow point as to whether the successor boards to the Transport Commission should find—if I can use the phrase without offence—this rather unexpected joker in the pack from the point of view of the successor boards and the Bill which was originally produced. It is really no more than that.
I should have thought that this was a fair Amendment from the point of view of those who will be running the country's transport and I cannot believe that saying, "You should not be liable to Case VII simply because of the arrangements which the Government are making in the Transport Bill" would act positively as an incentive to the Holding Company or to the Railways Board to sell off property quicker than it otherwise would have done so. That is an unreal fear though I know very well the anxieties felt by hon. Members on this matter.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 15.—(SUPPLEMENTARY.)

Mr. Barber: I beg to move, in page 21, line 41, at the end to insert:
and shares or debentures comprised in any letter of allotment or similar instrument shall be treated as issued unless the right to the shares or debentures thereby conferred remains provisional until accepted and there has been no acceptance".
It has been pointed out that the existing definition of shares in subsection (1) is not satisfactory and the Amendment ensures that, for the purposes of Case VII, where a company proposes to issue new shares or debentures and proceeds by way of letter of allotment instead of issuing the shares and debentures directly, the same consequences shall follow as if they had been issued directly unless the allotment is provisional and has not been accepted. This is a sensible extension of the definition of shares and one which, frankly, we ought to have thought of at an earlier stage. I hope that it will be accepted by the Committee.

Amendment agreed to.

Mr. Barber: I beg to move, in page 22, line 11, to leave out from "separately" to "but" and to insert:
and any partnership dealings shall be treated as dealings by the partners and not by the firm as such;".
This Amendment would have been moved by the Lord Advocate if he had been able to be here this evening. The Amendment, to subsection (3), clarifies the position of partners under Case VII in relation to dealings of the partnership. It is necessary because of anomalies that would otherwise arise in relation to Scottish partnerships. The position so far as English partnerships are concerned is perfectly satisfactory as the Bill stands.
Under the Bill, as drafted, difficulties could arise because in Scotland a partnership is a separate legal entity to which the partnership property belongs, whereas in England it is not a separate legal entity and the partnership property belongs to the partners according to their shares. Under subsection (3) it is provided that gains accruing on the disposal of partnership assets shall in Scotland as well as elsewhere in the United Kingdom be assessed under Case VII on the partners separately, as in the case of other joint owners.
Subsection (3) was intended to secure for the purpose of Case VII that there should be identical treatment of partners in Scotland and the rest of the United Kingdom, but the subsection as drafted does not achieve this. The Amendment secures the desired result by deleting the reference to the case of other joint owners and providing instead that any partnership dealings shall be treated as dealings by the partners and not by the firm as such. It consequently secures that Case VII liabilities will be determined by looking through the partnership to the interests of individual partners in Scotland as well as elsewhere in the United Kingdom.

9.30 p.m.

Mr. Mitchison: If I understand this aright, it comes to this. In England, partnership dealings are treated for taxation purposes as dealings by the separate partners. In Scotland, on the other hand, the partnership is assessable as such, and this Amendment is intended to withdraw from the Case VII arrangements any liability on the partnership as such and to substitute therefore liability on individual partners. I hope that I have it right.
I am glad, in a sense, to see that there has been an attempt to produce uniformity. As an Englishmen sitting for an English constituency, I find it difficult to appreciate the possible problems which this may cause in Scotland. Offhand, there might well be a difficulty if other taxes are to be assessed on the partnership as a unit in Scotland while this particular tax is to be dealt with on a special basis analogous to the English system. Am I right in thinking that taxes other than Case VII are now to be dealt with on the basis of an assessment on individuals rather than the partnership as such? I leave that question with the hon. Gentleman.
I put one further question to him, and I hope that he will give a full and detailed reply. What is to happen to these arrangements if we go into the Common Market?

Mr. Barber: I will draw the last point made by the hon. and learned Gentleman to the attention of my right hon. Friend the Lord Privy Seal, who will take due note of it
This Amendment, of course, relates only to tax charged under Case VII. The reason why it is not necessary to make similiar arrangements in respect of any other charge to Income Tax or Surtax in respect of a Scottish partnership is that we are concerned here only with the transfer of property, and it is only where there is a transfer of property giving rise to a charge under Case VII that difficulty arises. I think that I can best explain the matter by an example.
If a partner transfers his own property to the partnership, he is, under the law of Scotland, transferring the whole of the property to a separate legal entity although he is one of the partners. If the transfer involves the disposal of a chargeable assert within the relevant time from its acquisition, the partner will be liable to tax under Case VII on any gain he makes on the whole of the property transferred, whereas in England, because a partnership is not a separate legal entity, he will he liable only on the gain on the share of the property transferred to other partners.
The same sort of difficulty would arise where there was a new partnership. It might well be construed as being a transfer of the whole property from the old partnership to the new partnership, whereas, in fact, the partner concerned might still have retained the same share of the property.

Amendment agreed to.

Mr. Barber: I beg to move, in page 22, line 29, at the end to insert:
(5) An underwriting member of Lloyds or of an approved association of underwriters shall be treated for the purposes of this Chapter (and in particular of subsection (5) of section eleven) as absolutely entitled as against the trustees to the investments of his premiums trust fund, his special reserve fund (if any) and any other trust fund required or authorised by the rules of Lloyd's or the association in question, or required by the underwriting agent through whom his business of any part of it is carried on, to be kept in connection with the business; but—
(a) the trustees of any fund shall (subject to subsection (6) below) be assessed and charged to income tax at the standard rate as if this subsection had not been passed, and may, notwithstanding anything in any enactment or in the trusts of the fund, out of any gain accruing from the acquisition and disposal of an investment of the fund make good to the underwriting member any increase in the surtax or profits tax borne by him which is attributable to that gain; and

(b) in paragraph (a) of sub-paragraph (3) of paragraph 6 of the Twenty-first Schedule to the Income Tax Act, 1952 (which relates to the computation of the profits of an underwriter's business for the purpose of regulating payments into and out of his special reserve fund), the reference to income arising from the investments forming part of those funds shall include the amount of the gains chargeable to tax under Case VII which accrue in the underwriting year in question from the acquisition and disposal of any such investments, after deducting from those gains losses accruing before the end of that year from any chargeable acquisition and disposal of any such investments so far as those losses are not under this paragraph deductible from gains accruing in a previous underwriting year.
In this subsection expressions used in section four hundred and eighty of the Income Tax Act, 1952, or in the Twenty-first Schedule to that Act have the same meanings as they have for purposes of that section or Schedule.
(6) The assessment to be made on the trustees of a fund by virtue of paragraph (a) of subsection (5) above for any year of assessment shall not take account of losses accruing in any previous year of assessment, and if for that or any other reason the tax paid on behalf of an underwriting member for any year of assessment by virtue of assessments so made exceeds the tax for which he is liable, the excess shall, on a claim being made by him to the surveyor, be repaid by the Commissioners of Inland Revenue:
Provided that if the surveyor objects to a claim for a deduction on account of losses allowable under Case VII, the claim shall be heard and determined by the Commissioners concerned in like manner as if it were an appeal against an assessment under Case VII, and the provisions of the Income Tax Act, 1952, relating to the statement of a case for the opinion of the High Court on a point of law shall apply.
This Amendment adapts the provisions of Case VII of Schedule D to meet the special circumstances of underwriting members of Lloyds and other underwriters who maintain trust funds in connection with their business in conformity with Section 1 (6) of the Insurance Companies Act, 1958. The Amendment is long and somewhat complex, and it might be for the convenience of the Committee—indeed I owe it to the Committee—to give a fairly full explanation as this is a new matter. I hope that the hon. and learned Member for Kettering (Mr. Mitchison) will think it more convenient that I should do that at the outset rather than be asked detailed questions later.
Under Clause 9, the charge under Case VII is computed on the balance of the taxpayer's short-term gains in the relevant year from the acquisition and


disposal of chargeable assets after deducting any allowable Case VII losses accruing in that year or carried forward from earlier years. Clause 11 (5), which is a very relevant subsection in considering this Amendment, provides that, where assets are held by a nominee or bare trustee, one looks through to the beneficial owner of the assets in question for Case VII purposes; but other trustees are treated as an independent taxable entity for the purposes of Case VII.
I am sure that the Committee will agree—we discussed this at an earlier stage—that it is sensible and, indeed, only common sense that, when one is concerned merely with a bare trustee, one should look through the trustee to the actual beneficial owner. A Lloyds underwriter, or a "name" as he is sometimes known, has to put assets into the hands of trustees to ensure that funds are available to meet his underwriting liabilities. Most underwriters will have at least three separate trust funds. They will have more than that if they underwrite through more than one agent.
The trust funds fall into four classes—the Lloyd's deposit, the premiums trust fund, the special reserve fund and the premiums trust fund deposit. If asked to do so by hon. Members, I will explain the differences between the various trust funds, but I do not think that it will be thought necessary when I have explained the reason behind the Amendment.
As the Bill stands, liability under Case VII in respect of any short-term gains of each individual trust fund would be chargeable separately on the trustees of the fund, although, in fact, there may be only one underwriter concerned with a number of funds, and a net short-term loss of one fund of an underwriter would not be available for setoff against net short-term gains or other funds held for the same underwriter. In the computation of the Profits Tax, which is payable in respect of Lloyds underwriters' profits under the special reserve fund arrangements, it is the net short-term gains on all funds, after setting off any allowable losses, which will be taken into account.
This is clearly anomalous, and the anomaly arises because we are dealing with a type of taxpayer who is treated, for various reasons with which the Com-

mittee is familiar, in a quite unique manner. That the position is anomalous cannot be disputed, and it is obviously desirable that it should be put right. In particular, when a name belongs to three syndicates for which different underwriting agents act, a short-term loss for one of his premiums trust funds would not be available to set off against short-term gains of other such funds because he will have three separate premium trust funds.
On the other hand, if the same agent acted for all three syndicates, there would be only one trust fund and consequently there would be an effective setoff of short-term losses against short-term gains. Whether one has the position of three trust funds or of one trust fund is in a sense somewhat fortuitous. Consequently, here again is an anomaly which should be put right and is, in fact, put right by the Amendment.
Despite the apparent complexity of the subsection, it is really a matter of common sense in the end. The logical answer is that the Case VII liability should move through the trust funds to the name himself and that there should be a further right of set-off against short-term gains and losses of the underwriter in what I might call his private capacity. Underwriters are in this way put in the same position as other individuals who carry on business but who are not compelled by the nature of their business to subject their assets to these forms of trusts.

Mr. Mitchison: That was a clear explanation of a rather tangled and difficult matter. These trust funds were started, I think, as a result of the Harrison frauds at Lloyds, many years ago, and they have become more and more complicated. The actual position is that the name has really no voice whatever in the investments or in their disposal. They are almost entirely gilt-edged securities and things of that kind, or they used to be in the days when I knew about them, and I should have thought that there was not very much Case VII question likely to arise about them.
So far as there is any Case VII question, however, it seems logical that a man is compelled for reasons of public credit and public safety to put a quite substantial part of his assets into the


hands of trustees should not be penalised more than is necessary and, therefore, that he should be allowed to regard his property, whether forming part of those trust funds or not, as one whole. That, I understand, is what the Amendment proposes. I have no objection to it.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

New Clause.—(EXTENSION OF DOUBLE TAXATION RELIEF IN RESPECT OF CERTAIN DIVIDENDS.)

(1) Paragraph 10 of the Sixteenth Schedule to the Income Tax Act, 1952, and paragraph 3 of the Seventeenth Schedule to that Act (which relate to the allowance of double taxation relief on certain dividends paid to a company resident in the United Kingdom and controlling, directly or indirectly, not less than one half of the voting power in the company paying the dividend, and provide for taking account of the foreign tax paid by the last-mentioned company in respect of its profits) shall each be amended as follows:

(a) after the words "in the company paying the dividend" there shall be inserted the words "or which controls, directly or indirectly, a proportion of that voting power greater than one quarter and is subject to a local limitation preventing it from controlling a larger proportion"; and
(b) at the end of the paragraph there shall be added the words—
In this paragraph local limitation' means a limitation imposed by the law in force in the territory where the company paying the dividend is resident, or by executive action of the Government of that territory.

(2) Where a company resident in the United Kingdom either—

(a) controls, directly or indirectly, not less than one half of the voting power in a company resident in a territory outside the United Kingdom; or
(b) controls, directly or indirectly, a proportion of that voting power greater than one quarter and is subject to a local limitation preventing it from controlling a larger proportion:
then, for the purposes of any credit to be allowed to the first-mentioned company in accordance with the Sixteenth or Seventeenth Schedule to the Income Tax Act, 1952, in respect of a dividend paid to it by the other company, tax payable by the other company in respect of its profits under the law of any territory outside the United Kingdom shall be taken into account as if it were payable under the law of the first-mentioned territory, and paragraphs 7 and 8 of the said Sixteenth Schedule (which relate to the computation of the amount of income in certain cases where double taxation relief is allowed) shall apply accordingly.

In this subsection "local limitation" has the same meaning as it has (by virtue of subsection (1) above) in paragraph 10 of the said Sixteenth Schedule and paragraph 3 of the said Seventeenth Schedule.

(3) This section shall have effect only in relation to dividends by reference to which income tax is chargeable for the year 1962–63 or a subsequent year of assessment and (for the purposes of the profits tax) in relation to any other dividends which are received after the end of March, nineteen hundred and sixty-two, and by reference to which income tax is not chargeable for any year of assessment.—[Mr. Barber.]

Brought up, and read the First time.

Mr. Barber: I beg to move, That the Clause be read a Second time.
The new Clause follows from an undertaking which I gave in Committee concerning two points which had been raised by my hon. Friend the Member for Shipley (Mr. Hirst). As will be seen, the Clause concerns double taxation relief. It deals with two separate points, although they are inter-related. The first is the question of relief for underlying tax and the second concerns relief for what is sometimes known as third country tax.
In regard to the first point, relating to underlying tax, my hon. Friend the Member for Shipley moved a new Clause in Committee in which he proposed to allow relief for underlying tax. This, I should explain, is tax paid on the profits of a company out of which a dividend is paid. My hon. Friend proposed that there should be relief for that tax where a United Kingdom company controls not less than 25 per cent., instead of not less than 50 per cent., of the voting power of an overseas company paying a dividend.
When I replied to my hon. Friend. I explained that I could not advise the committee to go as far as was contemplated in his new Clause but that I believed that there were cogent arguments for the kind of case where the United Kingdom company has a large holding in an overseas company, but where the Government of the country in which the overseas company is resident refuses to allow the United Kingdom company to have a majority interest and insists that control should be in the hands of local residents. This is a situation which exists—hon. Members will probably themselves know instances—in a number


of cases, and I suppose the number is likely to be extended in the present world situation.
9.45 p.m.
The new Clause proposes that the existing provisions concerning double taxation relief for underlying tax should be extended so as to give relief where the United Kingdom company has the maximum shareholding permitted by the law or practice of the foreign country, subject to an overriding minimum of 25 per cent. Subsection (1) of the new Clause includes provisions which will enable relief to be allowed in those circumstances.
The second point with which the Clause is concerned is, as I said, what is known as third-country tax. Perhaps I can best put the point to the Committee in this way. I think it will be generally agreed that there is no good reason why a shareholder who gets a dividend from a company which is resident in country A should not get relief for the tax paid by the company in country B just as much as for tax paid in country A. In other words, one has the case of a shareholder in the United Kingdom with an interest in a company which is resident abroad and that company has not only to pay underlying tax in the country in which the company is resident but also has to pay tax which is levied for one reason or another by a third country.
As I say, I can see no reason in principle why one should not try to cover that sort of case. It seems to me to he, as a matter of principle, irrelevant whether the tax which is borne by the company resident overseas is levied by the country in which it is resident or by a third country. The Clause, therefore, proposes that relief should be allowed for third-country tax in the same classes of case as those in which relief is given for tax paid in the country where the paying company is resident—that is to say where the United Kingdom company controls 50 per cent. or more of the voting power of the company paying the dividend—and also under subsection (1) of the Clause where it controls the maximum shareholding permitted by the law or practice in the foreign country, subject again to an overriding minimum of 25 per cent. This is, I believe, a worth while reform which will bring relief in a

number of deserving cases, and I commend it to the Committee.

Mr. Geoffrey Hirst: I thank my hon. Friend and my right hon. and learned Friend. I raised this matter, as my hon. Friend said, in as reasonably an erudite way as one can at two o'clock in the morning. It is a highly technical matter. I am very grateful for what my hon. Friend has said. The statement was made at the time that he could not go as far as I wanted, but the strings which he has attached are very reasonable—that the provision should be kept within the limit of what is permissible in regard to a holding in the countries concerned.
That takes cognisance of the point I made on that occasion, which is terribly important. We have a changing pattern overseas now in the Commonwealth, and we have to adjust ourselves a little more—I made this point about the changing pattern—to make sure that we are not losers as a result of it. I am very grateful to the Economic Secretary. If he will allow me to pay him the compliment, his speech has shown the careful study being given to this very important matter and I am extremely grateful to him for it.

Mr. Douglas Houghton: I listened very attentively to the hon. Member for Shipley (Mr. Hirst) when he first put these matters before the Committee. He was in pretty good form, on and off, in Committee. I did not quite accept all the arguments which he used then, but I put that down to the time of night when we were considering the matter, and we waited to see what the Government would propose.
I am not very impressed by the case which the hon. Member or the Economic Secretary has put. This proposal is to give relief from United Kingdom Income Tax. It is our Revenue which is to surrender tax. We are the country which is to give the tax relief. Under the 1952 Act, double Income Tax relief is given where at least half a company in an overseas territory is owned by United Kingdom interests. That relief is based on the position of an overseas company which is substantially owned in this country, and one can see that in those circumstances it would be unfair to charge full United Kingdom Income


Tax on top of local income tax when such a substantial investment overseas is held by an English company.
But now it is proposed to give corresponding double Income Tax relief in oases where the United Kingdom ownership is as low as 25 per cent., in cases where the local territory imposes a limitation upon the ownership by United Kingdom interests of more than 25 per cent. If another country is so jealous of its own territorial ownership of companies operating within its boundaries as to impose a limitation of 25 per cent. on United Kingdom ownership, it must take into account the fiscal consequences of that limitation. It cannot have it both ways.
To give a company in those circumstances the same concession as that given to a company holding at least 52 per cent. of the equity shareholding, as under the 1952 Act, is to encourage other countries arbitrarily to curtail United Kingdom ownership of companies operating within their boundaries. I do not see that that is doing any good and it is certainly not assisting the expansion of United Kingdom investment in territories overseas. It is encouraging other countries to restrict United Kingdom ownership and at the same time giving the benefit of double Income Tax relief to those in this country who hold shares which would otherwise be subject to both lots of tax.

Mr. Hirst: Mr. Hirst indicated dissent.

Mr. Houghton: The hon. Member for Shipley (Mr. Hirst) is shaking his head, but I think the Committee will agree that before we give further relief from United Kingdom Income Tax we should be certain that these reliefs are justified and in the national interest, and not designed merely to accommodate our taxation system to the nationalistic policies of overseas territories, whatever they may be.
At the moment I am not satisfied about this new Clause. It is long and complicated, but the issues seem to be fairly clear, and if there is anything further that either the Economic Secretary or the hon. Member for Shipley can tell the Committee to convince us that this is the right and proper thing to do, we shall be receptive and keep open

minds, but we are jealous of the safeguards which the Revenue must have against unwarranted reliefs being given against United Kingdom Income Tax in respect of taxes paid to other countries, because that is what we are talking about.
It is only because taxation is levied in another country that we are having to consider giving tax relief in this country by taking into account, as the new Clause says, taxes paid in that other country. We have to be satisfied, therefore, that we are not bearing a disproportionate burden of the tax relief. After all, if other countries want investment from the United Kingdom, they should adjust their taxation systems to match their policies and not expect the United Kingdom to give all the taxation reliefs after they have had their share by taxing profits which arise from the companies operating in their territories.
The hon. Member for Folkestone and Hythe (Mr. Costain) is looking very restive. There must, therefore, be some sort of answer, and the sooner I sit down and listen to it the better, but I warn the Economic Secretary that he is a little stuck at the moment on this new Clause, because we are not satisfied about it.

Mr. Hirst: I do not want to delay the Committee. I am grateful to my hon. Friend the Economic Secretary, who is far from stuck. With the greatest respect to the hon. Member for Sowerby (Mr. Houghton)—and, incidentally, I join him when he talks about the need to protect the national interest—I do not think that he should be too parochial. It was all right laying down 50 per cent. and all these other rules when, as it were, we ruled the roost, but in view of the considerable changes which have occurred, and the growth of nationalism, of which I think hon. Gentlemen opposite are rather fond, we do not do that at all. The mere fact that we do not do it does not, however, mean that we do not want to encourage and take every advantage of overseas investment.
I quarrel with the idea that this is contrary to that idea. If there are not these advantages, there will not be the necessary investment. We have, therefore, to meet the situation as we see it. We must not be parochial, but, rather, empirical. The new Clause, as I argued


it at two o'clock in the morning, I admit, is put down to meet the situation as it is now developing, and as it clearly will continue to develop. I applaud my right hon. and learned Friend and my hon. Friend for their approach to this matter. It is realistic, and I am grateful to them.

10.0 p.m.

Mr. J. T. Price: I agree with my hon. Friend the Member for Sowerby (Mr. Houghton) that an adequate case has not been made out for the new Clause. I do not say this for any malevolent purpose, but as a practical man I recognise that even with the present Ministers in charge of the Treasury, with all their limitations, this House is the only guardian of British interests, which include very important financial interests, in international trade.
I want to draw attention to something which is directly linked with the point that we are discussing. Today, we are concerned with a paper concession which the Chancellor has decided to make in his solicitude to safeguard British subjects, who invest their money in property which is partly nvested abroad, against the evils of double taxation. Many double taxation agreements exist with different countries. They are matters of private arrangement and ordinary negotiation. But to express this as a general principle in a manner in which the Economic Secretary has done is not good enough.
This question must be considered against the background of something else which the House has done. When we were discussing Clause 28 of the 1957 Finance Bill we dealt with a matter which became known as the concession to the overseas trading corporations. An attempt was made by the Treasury to encourage foreign investment and to make fiscal arrangements that would accord with that policy. We then set up a system under which a concession would be made, on the granting of a certificate by the Treasury, in respect of British-registered companies wholly resident in this country whose capital was registered under the normal processes of British law, to the effect that the profits made on overseas operations could be retained in those countries and not returned for taxation purposes to London.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd): The Chancellor of the Exchequer (Mr. Selwyn Lloyd) indicated assent.

Mr. Price: The Chancellor nods. He will recall what I have in mind.
A few months ago I put down a Question to the Minister concerned, and I was told that as a result of the concession given in 1957 the loss to the Treasury in respect of moneys retained overseas and not returned for taxation to London was £9 million in 1958; £11 million in 1959, and £16 million in 1960— an increasing amount each year.
Since another concession is now being made, making a further hole in the public purse and the Exchequer account— a hole through which the products of foreign investment are not returned to this country—we are approaching a situation in respect of which, in recent months, the Chancellor has made great play, namely, a situation in which there are balance of payments difficulties, of which we are all too painfully aware. It is a situation in which this country cannot balance its accounts with its commitments overseas.
One of the salient features of the Chancellor's Budget statement which impressed a great many of us but which was not greatly debated at the time was that practically no invisible exports were returned to this country. Invisible exports, in terms of the products of foreign investments, insurance and shipping, in normal years used to amount to £400 million, which went to our credit in our balance of payments. At the time of the last Budget there were practically no invisible exports in our national accounts.
Is that surprising? Too many loopholes have been opened. What is the use of British investment overseas if, first, it does not provide employment for British subjects in this country and, secondly, it does not provide a credit balance towards our balance of payments in the national account? This question cannot be wafted aside by theoretical arguments. Our balance of payments now has none of the advantages that it used to have in the way of invisible exports. Companies are rearranging their accounts and are extracting from the Treasury a series of concessions of this kind, plus the major concession given in the Finance Act, 1957, which make it


impossible for the products of overseas investment to bring in any returns to the British Exchequer.
These are very serious, valid arguments, linked directly with the new Clause tabled by the Chancellor. The new Clause proposes further to excuse large chunks of taxation attracting a charge for the Revenue. If the investment is over 50 per cent., why should we stand aside and see the foreign country take advantage to encourage investment outside this country? I am not a Little Englander, nor have I a narrow, sentimental outlook. I do not deny that the spread of investment throughout the world is a task to which we should all lend ourselves as far as our abilities allow, but if the country which receives the investment is to have the product of it in employment of its natives and also the advantage in taxation, it is time we woke up.
We are not discharging our function if we give way all along the line to something which does not do credit to our common sense or sense of trusteeship of the people who send us here to look after their interests.

Mr. Barber: I assure the hon. Member for Westhoughton (Mr. J. T. Price) that while in the very nature of things it is impossible to give any estimate of the cost of this new Clause we certainly believe that it will be very small indeed. The hon. Member asked us why. The reason is that we do not know how many taxpayers there are who will benefit from this concession for the simple reason that they have not put in claims in past years. The best estimate that can be made is that the cost will be very small indeed and the numbers will be very few. To talk in terms of an overseas trading corporation and £7 million a year is incorrect, for the cost will not be of that nature.

Mr. J. T. Price: I remind the hon. Gentleman that he is now producing what is known as the de minimis argument, the servant girl's baby, which was "only a little one". In 1957, when the Clause to which I refer was before the House, I challenged it. I did so in a rather clumsy way, I admit, but, nevertheless, I was dealing with the principle. The present Minister of Health, who was then Economic Secretary, told me exactly

what the Economic Secretary is telling me now. He said that this was a very small matter and that it was hoped in a very few years that this step would make a considerable contribution to offset our losses. It has. The figures are "in the red", minus £9 million, minus £11 million and minus £16 million in three years.

Mr. Barber: If the hon. Member had not intervened at such length he would have found that I was about to deal with the question of principle on the basis that it is not enough, as I agree. I thought that he was going on to make a good point and not merely to say that we do not think that this will involve any great cost. A point of principle is involved, which was raised quite fairly by the hon. Member for Sowerby (Mr. Houghton).
I should have thought that if one were looking at the principle of the matter there is no good reason why relief for underlying tax should not be available generally, irrespective of the size of the shareholder's holding. This seems to me to be the basic principle from which we should start, and I remind the Committee that with regard to all Commonwealth countries relief for underlying tax is given without qualification. In most of our double taxation agreements there is provision for relief for underlying tax. While it is not conclusive, it is a relevant factor that the majority of the Royal Commission on the Taxation of Profits and Income favoured the extension of relief for underlying tax to all cases.
The hon. Member for Sowerby seemed to concern himself rather more with the effect of this concession on the overseas country which levies the tax than on the United Kingdom taxpayer. I have had occasions since I have been at the Treasury to consider one case of a United Kingdom company—not a large company—with a very fine history which invested a considerable sum of money in a subsidiary company overseas and had a controlling interest. It has a little over a 50 per cent, controlling interest and, consequently, under the existing law it got relief for underlying tax.
Unfortunately, in the last year or two it has been forced by devious means to sell part of the shareholding to local


inhabitants, and now its holding is just under 50 per cent., and as a result it has been hit very hard because, under the law as it stands, it will no longer get relief for underlying tax.
We must consider this matter not only from the point of view of the other countries, but also from the point of view of the United Kingdom taxpayer, because there are one or two very hard cases. The hon. Member said that in my opening remarks I did not explain the likely effect on our balance of payments, and he asked whether this would make investment abroad more or less attractive.
The view which we hold, having considered the matter very carefully—it is certainly not merely an Inland Revenue matter in a narrow sense, but also is of considerable concern to the Treasury from the point of view of the balance of payments—is that, on balance, to provide relief for underlying tax makes investment in other countries more attractive. This is one of the factors which we use as a bargaining counter when negotiating double taxation agreements.
It is because, in this case, we are making provision for relief from double taxation where there is no double taxation agreement that we have decided to limit it to the case in which the United Kingdom shareholder owns not less than 25 per cent. of the shares in the other country. We believe that this will not significantly weaken our bargaining position, but it was certainly one of the factors which we had in mind. I think that, on balance, this is a good thing to do. I earlier explained the nature of the Clause and how it operates, and on the point of principle I think that it is a desirable thing to do.

10.15 p.m.

Mr. Houghton: I am sorry to detain the Committee for a little longer but I am still in difficulty. I could quite understand if as a matter of taxation policy we decided that relief from United Kingdom Income Tax should be given to all investors overseas who were subject to local income tax. That would be a clear policy which we well understood whether we agreed with it or not. But that has not been our policy and that is not our starting point this evening. Our starting point this evening is that in the past, when a United Kingdom company has gone overseas, we have

given it relief from United Kingdom Income Tax in respect of local taxes paid by a company which is substantially owned by the United Kingdom company and operates abroad in a territory which is neither in the Commonwealth nor in a country covered by a double taxation relief agreement.
It is easy to see the basis upon which that has been done. It has been done with United Kingdom companies operating in overseas territories when the overseas companies have been owned as to at least one-half by shareholders in the United Kingdom. They are therefore British-owned companies operating overseas and paying dividends to British shareholders That is all very clear.
Suppose an overseas territory says to such a company, "We do not like the look of you. You are too heavily owned by shareholders in the United Kingdom and that is an affront to our sense of national pride", or for other reasons, perhaps economic, the territory wishes to deprive the United Kingdom shareholders of control of the local company and therefore imposes a limitation. Suppose arbitrarily the overseas territory imposes a limitation upon the shareholding which may be held in the United Kingdom. Then the company has ceased to be a United Kingdom company. It has become a locally-controlled company and, substantially, a locally-owned company. That raises quite different considerations in regard to taxation.
The Economic Secretary has said that cases have arisen in which great hardship has been caused by the action of the overseas territory, but apparently the overseas territory has not been concerned about the hardship that it has imposed upon shareholders in the United Kingdom who have invested their money in the overseas territory with a view to economic development. I hope that I do not sound unsympathetic to shareholders whose condition has been altered for the worse by the action of other countries. But this is a matter for discussion and negotiation between Her Majesty's Government and the territories concerned. Surely we are not going to allow British shareholders to be pushed around like this by overseas territories without suitable arrangements being made concerning taxation. What the Economic


Secretary is asking is that the conesquences of the arbitrary action of the overseas territory shall be alleviated by relief from United Kingdom tax. He is saying that the British taxpayer should foot the bill.
We do not see it in that light. I am not concerned for the moment with whether the amount of revenue involved is small. After all, many matters on which we have asked for concessions would have involved a small amount of revenue.

Mr. Barber: Wherever we can we will negotiate a double taxation relief agreement, but that is not always possible. We are not prepared to negotiate an agreement which, taken by and large, is not reasonably favourable to us. We would certainly prefer to negotiate agreements, but we must face the fact that there are cases in which we cannot do so.

Mr. Houghton: I am very much obliged to the Economic Secretary, because he has let the cat out of the bag. We are now dealing with territories which will not play ball. They will not negotiate a double taxation relief agreement. They arbitrarily require the United Kingdom company to divest itself of certain shareholding in the company in their territory. By force they effect the transfer of the ownership of the company into the hands of their own nationals and in general rather throw a lot of rough stuff about. The Economic Secretary tells the Committee that the British taxpayer must find some relief for those who are hard hit by such treatment. The Economic Secretary's fiscal remedy is not the proper remedy for this situation. This is really a matter of international relationships——

Mr. A. P. Costain: rose—

Mr. Houghton: No, I am on a very high and moral line now.
This can be raised from the sordid detail of tax relief to a question of whether the United Kingdom is willing to be treated in this way. Our investors have gone overseas, partly for enlightened self-interest, and partly for the development of the territory overseas, and some consideration must be given by the countries concerned to the

consequences of what they are doing. There is no evidence, except the Economic Secretary's last intervention, that that side of the matter is concerning them in the least. I must say that at the moment we do not regard fiscal relief as the remedy for this situation.

Mr. Callaghan: Surely, we are to have an answer?

Mr. Barber: I have now spoken at some length on two occasions concerning a matter which was debated previously—true, at two o'clock in the morning—when I replied at length to the very able speech of my hon. Friend the Member for Shipley (Mr. Hirst). Frankly, having spoken twice already, I thought that there was little more I need to say except to deal with the one point raised by the hon. Member for Sowerby (Mr. Houghton). I listened to him carefully, and I hope that in fairness he will agree that, apart from that one point, there was not a single question in his speech. In other words, he was making an argument.
If the hon. Gentleman thinks that this is bad policy; that we should not encourage investors in foreign territories to the very limited extent contained in this Clause; that we should not give relief to British taxpayers as a result of something which happens entirely out of their control and which hits them in a way which, in some cases, causes considerable hardship, he should, of course, vote against the new Clause.

Mr. Callaghan: Is it the hon. Gentleman's duty to help the shareholders of this country irrespective of the consequences to the general body of the taxpayers? That, in fact, is what he is now doing. He is proposing to visit on the general body of the taxpaying public the consequences of his failure to effect a double taxation agreement with some of these countries. That is the case made out by my hon. Friend the Member for Sowerby (Mr. Houghton), to which there has been no reply.
The hon. Gentleman is entirely misconceiving both his duty and that of the Treasury. It is not the Treasury's job to help overseas investments, but to help overseas investments where there is to be a dividend for the nation. That is the Treasury's job. The countries


which have refused to make a double taxation agreement—those with which there is no taxation reciprocity at all— are the very sort where a quick profit may be made but where, equally, there is very unlikely to be any return to the taxpayer.
The hon. Member for Shipley (Mr. Hirst) looks like a cat that has got at the cream. That, of course, is the fact. I have never seen an hon. Member look at his own Front Bench so benignly. He has that benign expression because he has obtained a concession—large or small. The Economic Secretary says that it is small but, if that is the case, how can it he of help to overseas investors'? We have only heard the hard case of one company. No case has been made out by the hon. Gentleman.
Does not this illustrate, once again, the debauchery going on in our own taxation system? I hope that the Chancellor will take this matter seriously, because it is serious that our taxation system should be getting so twisted that practically any concession can be wrung out of the right hon. and learned Gentleman by pressure being placed on him, irrespective of the general structure of the system.
The whole basis for the 50 per cent. provision was purely to ensure a majority holding so that the Inland Revenue could demonstrate its authority and get the information necessary concerning the extent of the double taxation relief that was needed. In other words, the Inland Revenue wanted proof before it gave any relief. As soon as the figure gets below 50 per cent. of the voting power—and 25 per cent. is proposed—it makes it impossible for the Revenue to prove any case and with the figure of 25 per cent. the Revenue will find it impossible to get the necessary information before giving any taxation reliefs.
The Economic Secretary now proposes to give carte blanche to this group of shareholders investing in companies in countries which are not willing to enter the double taxation system. The hon. Member for Shipley has persuaded the Government. irrespective of the general interests of the body of British taxpayers, to give reliefs of this sort.

Mr. Hirst: Rubbish.

Mr. Callaghan: It is all very well for the hon. Member to say "Rubbish", but he knows that that is exactly what he has done. The Inland Revenue can only prove whether double taxation relief should be given in these cases or how much should be given if it can get the necessary information. Is that not so? I ask the Economic Secretary to correct me if I am wrong.
The Inland Revenue is unable to do this unless there is a voluntary agreement by the company concerned to supply the information. Is it likely that a company in a country which has refused to make such an agreement with us will voluntarily give the Inland Revenue this information? Of course not. Let us be quite clear about this. The Economic Secretary has encouraged every nation requiring more investment from overseas but not wishing to enter a double taxation agreement to reduce the figure to 25 per cent. and to refuse to enter into an agreement with us.
Despite all this, the Economic Secretary says, "It will he all right. The general body of British taxpayers will make up the deficiency." We have received no answers to the questions put by my hon. Friend the Member for Sowerby. This is another case of scuttle. It is because the Government are willing to accede to the pressure brought upon them by the hon. Member for Shipley that hon. Gentlemen opposite are faced with the situation of being asked to vote in favour of a policy which will mean that the general body of taxpayers will pay for the failure of the Government to secure the proper rights of the Inland Revenue and the Government should have before making concessions of this sort.
The Treasury has been wrong and weak to be over-ruled in this matter by the hon. Member for Shipley. They have done so merely to purchase his good will. Is not the expense of purchasing that good will a little high? I do not blame the hon. Member for Shipley for appearing so happy. He has got away with the swag but I see no reason why the companies concerned, the tiny handful involved, should get away with the swag without the House of Commons knowing what has been done.

Question put, That the Clause be read a Second time:—

The Committee dividedAyes 217. Noes 139.

Division No. 227.1
AYES
[10.29 p.m.


Agnew, Sir Peter
Gower, Raymond
Peyton, John


Atkins, Humphrey
Green, Alan
Pickthorn, Sir Kenneth


Balnlel, Lord
Gurden, Harold
Pitman, Sir James


Barber, Anthony
Hall, John (Wycombe)
Pott, Percivall


Barlow, Sir John
Harris, Frederic (Croydon, N.W.)
Prior, J. M. L.


Barter, John
Harris, Reader (Heston)
Proudfoot, Wilfred


Batsford, Brian
Harrison, Col. Sir Harwood (Eye)
Pym, Francis


Bennett, F. M. (Torquay)
Harvey, Sir Arthur vere (Macclesf'd)
Redmayne, Rt. Hon. Martin


Bidgood, John C.
Harvey, John (Walthamstow, E.)
Rees, Hugh


Biffen, John
Hastings, Stephen
Rees-Davies, W. R.


Biggs-Davison, John
Hay, John
Renton, David


Birch, Rt. Hon. Nigel
Heald, Rt. Hon. Sir Lionel
Ridley, Hon. Nicholas


Bishop, F. P.
Henderson, John (Cathcart)
Rippon, Geoffrey


Black, Sir Cyril
Hendry, Forbes
Roberts, Sir Peter (Heeley)


Bossom, Clive
Hlley, Joseph
Rodgers, John (Sevenoaks)


Bourne-Arton, A.
Hirst, Geoffrey
Roots, William


Bowen, Roderic (Cardigan)
Hobson, Sir John
Ropner, Col. Sir Leonard


Boyle, Sir Edward
Hocking, Philip N.
Royle, Anthony (Richmond, Surrey)


Brewls, John
Holland, Philip
St. Clair, M.


Brooke, Rt. Hon. Henry
Hollingworth, John
Scott-Hopkins, James


Brown, Alan (Tottenham)
Hoosen, H. E.
Seymour, Leslie


Browne, Percy (Torrington)
Hopkins, Alan
Shaw, M.


Buck, Antony
Hornby, R. P.
Shepherd, William


Bullard, Denys
Howard, Hon. G. R. (St. Ives)
Smith, Dudley (Br'ntf'd &amp; Chiswlck)


Campbell, Gordon (Moray &amp; Nairn)
Hughes-Young, Michael
Smithers, Peter


Carr, Compton (Barons Court)
Iremonger, T. L.
Spearman, Sir Alexander


Carr, Robert (Mitcham)
Irvine, Bryant Godman (Rye)
Stanley, Hon. Richard


Cary, Sir Robert
James, David
Stevens, Geoffrey


Channon, H. P. G.
Jenkins, Robert (Dulwich)
Steward, Harold (Stockport, S.)


Chataway, Christopher
Jennings, J. C.
Storey, Sir Samuel


Chichester-Clark, R.
Johnson, Dr. Donald (Carlisle)
Studhoime, Sir Henry


Clark, Henry (Antrim, N.)
Johnson, Eric (Blackley)
Summers, Sir Spencer


Cole, Norman
Kerans, Cdr. J. S.
Talbot, John E.


Collard, Richard
Kershaw, Anthony
Tapsell, Peter


Cooke, Robert
Kirk Peter
Taylor, Edwin (Bolton, E.)


Cooper, A. E.
Lancaster Col C G
Taylor, Frank (M'ch'st'r, Moss Side)


Cooper-Key, Sir Neill
Legge-Bourke, Sir Harry
Taylor, W. J. (Bradford, N.)


Cordeaux, Lt.-Col, J. K.
Lewis, Kenneth (Rutland)
Teeling, Sir William


Corfield, F. V,
Lilley, F. J. P,
Thomas, Leslie (Canterbury)


Costain, A. P.
Linstead, Sir Hugh
Thomas, peter (Conway)


Coulson, Michael
Litchfield, Capt. John
Thompson, Richard (Croydon, S.)


Critchley, Julian
Lioyd, Rt. Hon. Selwyn (Wirral)
Thorpe Jeremy


Crowder, F. P.
Longbottom, Charles
Tiley, Arthur (Bradford, W.)


Curran, Charles
Longden, Gilbert
Touche, Rt. Hon. Sir Gordon


Currie, G. B. H.
Loveys, Walter H.
Turner, Colin


Dance, James
McLaren, Martin
Turton, Rt. Hon. R. H.


d'Avigdor-Goldsmid, Sir Henry
Maclean, sir Fitzroy(Bute&amp;N.Ayrs)
Tweedsmuir, Lady


Deedea, W. F.
Macleod, Rt. Hn. lain (Enfield, W.)
van Straubenzee, W. R.


de Ferranti, Basil
McMaster, Stanley R.
Vane, W. M. F.


Digby, Simon Wingfleld
Macmillan, Maurice (Halifax)
Vaughan-Morgan, Rt. Hon. Sir John


Donaldson, Cmdr. C. E. M.
Macpherson, Niall (Dumfries)
Vickers, Miss Joan


Doughty, Charles
Maddan, Martin
Wade, Donald


Drayson, G. B.
Maginnis, John E.
Wakefield, Sir Wavell


du Cann, Edward
Manningham-Buller, Rt. Hn. Sir R.
Walder, David


Duncan, Sir James
Markham, Major Sir Frank
Walker, Peter


Elliot, Capt. Walter (Carshalton)
Marten, Neil
Walker-Smith, Rt. Hon. Sir Derek


Errington, Sir Eric
Mathew, Robert (Honlton)
Wall, Patrick


Farey-Jones F. W.
Matthews, Gordon (Meriden)
Ward, Dame Irene


Farr, John
Mawby, Ray
Webster, David


Fell, Anthony
Maxwell-Hyslop, R. J.
Wells, John (Maldstone)


Finlay, Graeme
Maydon, Lt.-Cmdr. S. L. C.
Williams, Paul (Sunderland, S.)


Fisher, Nigel
Mills, Stratton
Wills, Sir Gerald (Bridgwater)


Fletcher-Cooke, Charles
Morgan, William
Wilson, Geoffrey (Truro)


Forrest, George
Nabarro, Gerald
Wise, A. R.


Fraser, Hn. Hugh (Stafford &amp; Stone)
Neave, Airey
Wolrige-Gordon, Patrick


Fraser Ian (Plymouth, Sutton)
Noble, Michael
Woodnutt, Mark


Gammans, Lady
Oakshott, Sir Hendrie
Woollam, John


Gardner, Edward
Orr-Ewing, C. Ian
Worsley, Marcus


Gilmour, Sir John
Osborn, John (Hallam)
Yates, William (The Wrekin)


Clover, Sir Douglas
Page, Graham (Crosby)



Glyn, Dr. Alan (Clapham)
Pannell, Norman (Kirkdale)
TELLERS FOR THE AYES:


Goodhart, Philip
Pearson, Frank (Clitheroe)
Mr. J. E. B. Hill and


Goodhew, Victor
Percival, Ian
Mr. Michael Hamilton.




NOES


Ainsley, William
Awbery, Stan
Bennett, J. (Glasgow, Bridgeton)


Allaun, Frank (Salford, E.)
Baxter, William (Stirlingshire, W.)
Blackburn, F.


Allen, Scholefield (Crewe)
Bence, Cyril
Blyton, William




Bowden, Rt. Hn. H. W. (Leics. S.W.)
Hunter, A. E.
Price, J. T. (Westhoughton)


Braddock, Mrs. E. M.
Hynd, John (Attercliffe)
Probert, Arthur


Bray, Dr. Jeremy
Irvine, A. J. (Edge Hill)
Purvey, Cmdr. Harry


Broughton, Dr. A. D. D.
Irving, Sydney (Dartford)
Redhead, E. C.


Callaghan, James
Janner, Sir Barnett
Robertson, John (Paisley)


Castle, Mrs. Barbara
Jay, Rt. Hon. Douglas
Robinson, Kenneth (St. Pancras, N.)


Cliffe, Michael
Jenkins, Roy (Stechford)
Rodgers, W, T. (Stockton)


Collick, Percy
Johnson, Carol (Lewisham, S.)
Rogers, G. H. R. (Kensington, N.)


Corbet, Mrs. Freda
Jones, Dan (Burnley)
Ross, William


Craddock, George (Bradford, S.)
Jones, Elwyn (West Ham, S.)
Short, Edward


Cronin, John
Jones, J. Idwal (Wrexham)
Silverman, Sydney (Nelson)


Cullen, Mrs. Alice
Jones, T. W. (Merioneth)
Skeffington, Arthur


Davies, G. Elfed (Rhondda, E.)
Kelley, Richard
Slater, Joseph (Sedgefleld)


Davies, Ifor (Gower)
King, Dr. Horace
Small, William


Delargy, Hugh
Lawson, George
Smith, Ellis (Stoke, S.)


Diamond, John
Ledger, Ron
Sorensen, R. W.


Dodds, Norman
Lee, Miss Jennie (Cannock)
Soskice, Rt. Hon. Sir Frank


Dugdale, Rt. Hon. John
Lever, L. M. (Ardwick)
Spriggs, Leslie


Edelman, Maurice
Lewis, Arthur (West Ham, N.)
Stewart, Michael (Fulham)


Edwards, Rt. Hon. Ness (Caerphilly)
Loughlin, Charles
Stonehouse, John


Edwards, Walter (Stepney)
Mabon, Dr. J. Dickson
Stones, William


Evans, Albert
MacColl, James
Taverne, D.


Fernyhough, E.
McKay, John (Wallsend)
Taylor, Bernard (Mansfield)


Fitch, Alan
Mallalieu, E. L. (Brigg)
Thompson, Dr. Alan (Dunfermllne)


Fletcher, Eric
Manuel, Archie
Thornton, Ernest


Foot, Michael (Ebbw Vale)
Mapp, Charles
Tomney, Frank


Fraser, Thomas (Hamilton)
Marsh Richard
War boy, William


Galpern, Sir Myer
Meason, Roy
Weitxman, David


Ginsburg, David
Mason, Roy
White, Mrs. Eirene


Gordon Walker, Rt. Hon. P. C.
Mendelson, J. J.
Wigg, George


Greenwood, Anthony
Millan, Bruce
Wilkins, W. A.


Griffiths, W. (Exchange)
Milne, Edward
Williams, D. J. (Neath)


Hale, Leslie (Oldham, W.)
Mitchison, G. R.
Williams, LI. (Abertillery)


Hall, Rt. Hn. Glenvll (Coine Valley)
Moody, A. S.
Williams, W. R. (Openshaw)


Hamilton, William (West Fife)
Morris, John
Williams, W. T. (Warrington)


Hannan, William
Mulley, Frederick
Willis, E. G. (Edinburgh, E.)


Harper, Joseph
Neal, Harold
Wilson, Rt. Hon. Harold (Huyton)


Hayman, F. H.
Noel-Baker, Francis (Swindon)
Winterbottom, R. E.


Henderson,Rt.Hn.Arthur(RwlyRegia)
Ollver, G. H.
Woof, Robert


Herbison, Miss Margaret
Owen, Will
Wyatt, Woodrow


Hllton, A. V.
Paget, R. T.
Yates, Victor (Ladywood)


Holman, Percy
Pargiter, G. A.



Houghton, Douglas
Pearson, Arthur (Pontypridd)
TELLERS FOR THE NOES:


Howell, Charles A. (Perry Barr)
Peart, Frederick
Mr. Grey and Mr. MeCann.


Howell, Denis (Small Heath)
Pentland, Norman



Clause added to the Bill.

New Clause.—(TAXATION OF GAS COUNCIL AND AREA BOARDS.)

(1) Subject to the provisions of this section, for the purposes of income tax and for the purposes of the profits tax the Gas Council shall be treated as carrying on a trade or business from the beginning of April, nineteen hundred and sixty-two, and from the beginning of that month—

(a) any trade or business carried on by an Area Board within the meaning of the Gas Act, 1948, shall be treated as part of the trade or business carried on by the Gas Council;
(b) subject to paragraph (c) below, any property, rights or liabilities of any such Board shall be treated as property, rights or liabilities of the Gas Council, and anything done by or to any such Board shall be deemed to have been done by or to the Gas Council;
(c) any rights, liabilities or things done—

(i) of, by or to the Gas Council against, to or by any such Board; or
(ii) of, by or to any such Board against, to or by the Gas Council or any other such Board shall be left out of account;
and income tax and the profits tax shall be charged accordingly.

(2) Subsection (1) above shall not affect income tax for any year of assessment earlier than the year 1962–63 or the profits tax for any chargeable accounting period ending with or before the end of March, nineteen hundred and sixty-two, or the computation of the profits and gains or losses of the trade or business of an Area Board for any such year of assessment or chargeable accounting period; and any such losses may be carried forward and set off against the profits or gains of the trade or business of the Gas Council as if incurred by the Gas Council in carrying on that trade or business.

(3) The trade or business of the Gas Council shall not be treated as a new trade or business set up and commenced at the beginning of April, nineteen hundred and sixty-two; but, subject to subsection (2) above. the Income Tax Acts and the enactments relating to the profits tax shall apply in relation to that trade or business as if before the beginning of that month it had consisted of the trades or businesses of the Area. Boards, and (without prejudice to the generality of the foregoing) allowances and balancing charges shall be made to or on the Gas Council accordingly by reference to the capital expenditure of Area Boards and to the allowances made to Area Boards in respect of that expenditure.

(4) The expenses of the Gas Council to which Area Boards may be required to contribute under subsection (1) of section forty-eight of the Gas Act. 1948, shall be taken to include the satisfaction of any obligations of the Gas Council in respect of income tax or the profits tax.—[Mr. Brooke.]

Brought up, and read the First time.

Mr. Brooke: I beg to move, That the Clause be read a Second time.
The effect of the new Clause is, quite simply, to make the taxation treatment of the gas industry conform, from 1st April this year onwards, with that which already exists for the electricity industry. The Electricity Council, the Central Electricity Generating Board and all the area boards in England and Wales are treated for tax purposes as one entity carrying on one trade. The Committee will probably agree in principle that there should be no discrimination in the tax treatment of these two nationalised industries.
At present, each of the 12 area gas boards is separately liable to tax. The Gas Council, on the other hand, is not regarded as a trading body and is not taxed. That has been a not inappropriate arrangement hitherto, because each Area Gas Board has been primarily responsible for the supply of gas in its own area and for the capital expenditure Which is consequent on that responsibility.
The industry, however, is changing and there are signs of the manufacture and supply of gas becoming more centralised than hitherto. In particular, the Gas Council is now assuming the responsibility for considerable capital expenditure on pipelines and storage in connection with the methane gas project.
Under existing law, the Gas Council would not be entitled to capital allowances, the reason being that it is not a trading body in the eyes of the law. It would, however, be unfair that no capital allowances should accrue in relation to this capital expenditure just because it is to be incurred by the Gas Council and not by any of the area board's. For that reason, my right hon. and learned Friend the Chancellor of the Exchequer came to the conclusion that it was essential to make such changes in the tax treatment of the industry as are proposed in the new Clause.
First, it is essential to treat the Gas Council henceforth as carrying on a trade, because otherwise it would be impossible for it to qualify for capital allowances in respect of this capital investment. That would not be enough, however, because there might be no


profits against which those capital allowances could be set if the Gas Council were considered solely by itself for tax purposes. Therefore, the new Clause goes further and enacts that the gas industry as a whole shall in future be treated as one for tax purposes. If the new Clause is accepted by the Committee, the capital allowances can be secured, and properly secured, for the benefit of the industry as a whole against the profits of the industry as a whole.
What the Clause does is in line with what already happens for the electricity industry. The only difference is that, in the case of gas it will operate from April of this year, although subsections (2) and (3) of the new Clause are designed to effect a smooth transition from the old system to the new. Although it is known that the future structure of the gas industry is under consideration—we have, for example, had a Report from the Select Committee on Nationalised Industries making certain recommendations about that—the Clause is in no sense a forward pointer to whatever may happen in that respect. In no way does it anticipate whatever decisions may be reached on that matter.
Hon. Members may ask why the Chancellor decided to bring forward the now Clause at this stage. The answer is that my right hon. and learned Friend had some disposition at first to postpone any tax change until such time as the future structure of the industry might be determined. He finally came to the conclusion, however, that that would be unfair to the industry. It would either involve unfair tax discrimination such as I have described, because it would be impossible for the benefit of capital allowances to accrue to the industry, or, alternatively, it would involve him at some future date in making retrospective provision for these capital allowances back to April of this year.
10.45 p.m.
It seemed on consideration that neither of those was the proper course to follow that it would be better to proceed now, even though the future structure is not yet determined, and then there need be nothing retrospective about these provisions. If at some future date the structure of the industry is modified—I make no prophecy about that—my right hon.

and learned Friend would feel that that would be the proper moment to propose to Parliament any further amendments in the tax provisions relating to the gas industry that the new structure might require. The main change is being made in this Clause. It would simply be a matter of shaping the provision in the Clause to the new structure as it may be evolved.
So far as I am aware, there is nothing controversial in the proposal in the new Clause, and I hope that the Committee will agree that this is a commonsense approach. I feel sure that there could be hardly any criticism of the general proposition that the electricity industry and the gas industry should be treated on equal terms so far as taxation is concerned.

Mr. Bruce Millan: The Chief Secretary has given a lucid explanation of the Clause, and I think that the Committee will probably want to accept it. But there is one aspect of the matter with which the right hon. Gentleman has not dealt at all, and it is the most fundamental aspect, and I should like him to say a word about it.
What does the Clause mean in terms of actual tax payable by the gas industry? The Chief Secretary said nothing at all about that. Are any of the area gas boards at the moment paying Income Tax or Profits Tax? Can the Chief Secretary say whether under the. present arrangements any of the area boards would be expected to pay Income Tax or Profits Tax at some time in the near future? Will the result of the Clause be that the time at which the industry pays Income Tax or Profits Tax, or the amounts of tax payable, will be deferred, or does it not? Can the right hon. Gentleman say something about that? That is, after all, the main question, at least from the industry's point of view, and, I should have thought, also from the Government's point of view in terms of revenue.
There is a second point that I should like the right hon. Gentleman to answer. Some of the area gas boards, I imagine, must have considerable taxation losses at the moment, not necessarily financial losses in terms of their accounts, but considerable taxation losses which they are carrying forward. Will these taxation losses now be carried forward in


the Gas Council's overall computation? When the Clause is passed, as I read it, it will be possible to carry them forward, as I think would be only fair and equitable. Perhaps the Chief Secretary will say something about that, because it has a very important bearing on my first question about the effect on the tax liability of the industry at the moment and the anticipated effect on it over the next year or two.

Mr. Nabarro: I rise to support the new Clause and ask my right hon. Friend one or two questions concerning the accountancy aspects of the proposed changes.
Surely what my right hon. Friend has told the Committee means that the Gas Council will, upon this Clause being enacted, be in the position of a parent company and the 12 area boards in the position of subsidiary companies? According to the Companies Acts, the publication of accounts, therefore, from next year should take the form of the publication of individual accounts for each of the area boards and one consolidated account in respect of the Gas Council. I should not like to lose the prerogative of challenging from time to time in Parliament, on the appropriate nationalised industry debates and elsewhere, the individual figures which are shown in the accounts of the area boards, and I hope that it is not the intention of the Treasury to require the Minister of Power to end the system of having individual trading accounts for that chargeable accounting period annually which ends on 31st December each year, one trading account for each area board, exactly in the same way as a subsidiary company would publish its accounts, and a consolidated account for the Gas Council as the account for the parent company.
In reply to the hon. Member for Glasgow, Craigton (Mr. Millan) I would say that there are area boards with taxation losses forward, of course. On the other hand, there are many with surpluses— profits—accumulated and carried forward annually. I presume that in future under the proposed enactment the accounts of all 12 area boards will be merged and a balance struck as to the aggregation of profits forward less losses

forward, and that that will in future be shown on the consolidated account of the Gas Council annually, the Gas Council attracting not only capital allowances, such as investment and initial allowances for the capital expenditure of each of the area boards, but also its own capital expenditure in the form of such enterprises as investment in methane.
With those few comments and questions, I thoroughly approve of the reform, which is a good deal overdue, and wish it every success.

Mr. Brooke: The hon. Member for Glasgow, Craigton (Mr. Millan) asked which, if any, of the area boards was paying tax at present. The answer is that none of them is paying tax at present. If the boards remained liable as separate entities, the view of the Gas Council is that it would be unlikely that any of them would incur liability for Income Tax or Profits Tax within the next five years or so. The main point, as he will appreciate, is that once the Gas Council embarked on capital expenditure, there would be no chance of charging the capital allowances against profits anywhere unless we were to alter the law, render the Gas Council a trading body and provide for treating the area boards and the Council together as a single entity for the capital allowances to be chargeable against the total profits of the industry.
Secondly, he asked about the transition. I can assure him that accumulated losses or allowances which, so to speak, belong to the area boards will not be lost. The converse of that is that the Gas Council will not be treated as having an initial year for tax purposes but will be treated under this Clause as a continuing body, so that there will be a perfectly natural transition from the old system to the new.
I am grateful to my hon. Friend the Member for Kidderminster (Mr. Nabarro) for his welcome of the Clause. It is true that for tax purposes the Council and all the boards will have to be treated collectively, but certainly I have received no indication that that will lead to any less clear and separate provision of accounts by the bodies concerned, and I think that I can say with confidence that the acceptance of this Clause will in


no way reduce the amount of information which will be available to Parliament and the public.

Question put and agreed to.

Clause read a Second time and added to the Bill.

Ninth Schedule.—(MISCELLANEOUS RULES APPLICABLE TO CASE VII OF SCHEDULED.)

Sir E. Boyle: I beg to move, in page 58, lines 13, at the end to insert:
(8) Notwithstanding anything in sub-paragraphs (3) to (6) above, where, under arrangements designed to postpone the transfer or delivery of shares disposed of, a person by a single bargain acquires shares for transfer or delivery on a particular date or in a particular period and disposes of them for transfer or delivery on a later date or in a later period, then—

(a) the shares disposed of by that bargain shall be identified with the shares thereby acquired; and
(b) shares previously disposed of which, but for the operation of paragraph (a) above in relation to acquisitions for transfer or delivery on the earlier date or in the earlier period, would have been identified with the shares acquired by that bargain—

(i) shall, subject to sub-paragraph (3) above, be identified with any available shares acquired for such transfer or delivery (that is to say, any shares so acquired other than shares to which paragraph (a) above applies and other than shares with which shares disposed of for such transfer or delivery would be identified apart from this suc paragraph); and
(ii) in so far as they cannot be so identified shall be treated as disposed of for transfer or delivery on the later date or in the later period above mentioned.
The object of this Amendment is to remedy an anomaly which arises under the Bill in relation to someone who sells shares on the Stock Exchange and then enters into what are called contango arrangements in respect of that sale. I am sure that we are glad to have the hon. Member for Bosworth (Mr. Wyatt) with us for this important subject, and I shall try to emulate the high moral line of the hon. Member for Sowerby (Mr. Houghton) while I expound it.
Contango arrangements provide for a client of the Stock Exchange to continue his original bargain from one account to another by making one single bargain for purchases and sale at one fixed "making-up" price. If he has sold shares for the first account, he contangoes

by buying for that account and simultaneously selling for the next. If he has bought shares, he sells for the original account and buys for the next.
The most lucid explanation that I know of this practice is to be found in the late Sir Oscar Hobson's book on the City. Even those who disagree with his politics will not quarrel with me when I say that his description of this is very clear.
Contango arrangements can be made over a number of accounts beginning from the original sale or the original purchase, but the final effect of the con-tango operations, looked at by themselves, is that the client has sold his shares, or bought them, for an amount equal to the original price. But he will have had to find extra expenses for con-tango arrangements, and in addition he will have had to pay, or may have received, money by way of what is called con-tango interest, that is to say, the rate which normally a buyer is prepared to pay for the con-tango facilities and which a seller will get for affording these facilities.
In the case of a seller of shares who contangoes his sale, paragraph 8 (4) of this Schedule identifies the original sale of shares for the first account with the subsequent purchase for that account, and, if the con-tango continues, the sale for the next account with the subsequent purchase for that account, and so on.
If contango arrangements are made on a falling market, each contango gives rise to a taxable profit arrived at by comparing the sale price with a lower purchase price. This result is fair enough if the original sale was intended as a bear transaction, that is to say, the object was to take a profit at the end of the day by buying in the shares at a lower price than one originally sold for, because in that case the existing rule picks up the overall profit in instalments, but if the client is simply selling shares which he has, the result under the Bill as it stands is to tax him on a quite unreal profit. The Amendment which I have moved adds a new sub-paragraph to put this matter right.
Sub-paragraph (8, a) of the Amendment provides for a special identification rule where a seller of shares enters into con-tango arrangements. The new rule matches the shares bought and sold in


the single bargain which I have described. The result is that the con-tango will give rise to profit for Case VII purposes only in respect of the excess of any con-tango interest received over the expenses of the transaction as a whole.
The actual price of the purchase and sale is the same fixed making-up price, but at the same time it was also necessary in this Amendment to provide for the case where the original sale was made in pursuance of a bear transaction.
With the new basis rule for contangoed sales, further provision has to be made to secure that a bear profit will remain taxable. Sub-paragraph (8, b) makes the necessary provisions which have to cover the possibility that a con-tango could be part of a whole set of complicated transactions in the same shares.
There is only one more point to explain about the Amendment. I apologise for dealing with this technical subject, but we cannot legislate for these speculative gains without the problem of contangoes coming in. The rules under sub-paragraph (8) apply not only to shares but equally to assets of a nature that are dealt in without identifying the particular assets—like commodities bought and sold on a futures market. I have been talking of shares, but they are not the only things we are considering under sub-paragraph (8).
I hope that with that explanation the Committee will agree to the Amendment.

11.0 p.m.

Mr. Diamond: I do not think that any of us has ever seen the Financial Secretary read his brief with such assiduity, and keep his eyes so close to the paper, as happened on this occasion—for the obvious reason that the matter is full of complication and that it would be dangerous indeed for anybody, even such an expert as the hon. Member himself, to depart for one second from his brief, lest What he said should be even more complicated than what we have just listened to.
But he said one thing which is quite clear to all of us, namely, that we cannot legislate for a speculative gains tax without going through all this fantastic complication. The essence of the matter is that the Treasury, having spent about a year producing this so-called capital

gains tax, having devoted about 30 pages of this Bill, including this Schedule— about half the Bill in all—to these provisions, and having made the matter so complicated that it is obviously beyond any one of us here to understand or follow—including the Leader of the House, who did not seem to be in complete grasp of the situation as he usually is—we now observe that the matter is to be amended already, while we are still considering the Bill, in order to make it tie up in some degree with the existing practice on the Stock Exchange.
Surely this is evidence, if any were needed, that this mouse is a hopelessly complicated, un-intelligible thing, which will cause more difficulty than it will produce revenue, and which certainly is not the sort of thing to which we can give approval. I am talking about the mouse in general, and not merely the Amendment. It can be very complicated, and I should have thought that what we have just listened to was evidence of that complication.
The Amendment denies the whole principle on which the Bill has been framed—the principle of saying that as we cannot see what is in the mind of the taxpayer at the time when he enters into his Stock Exchange transaction and see whether he is intending to speculate, that is, to make a profit, or not to speculate, that is, to invest, we must say that if he sells within six months his motive was to speculate and if he does not his motive was to invest.
In this new sub-paragraph we are dealing with the arrangements designed to postpone the transfer of such a share, but we may go wider than the contango to which the hon. Member has just referred. There is nothing in the provision which specifically excludes anything apart from the contango. We can read it as referring to transactions which would deliberately set out to avoid tax which might otherwise fall on the taxpayer by making it possible for him to exceed the six months' period. The main point I make is the complication which arises exclusively from having this ridiculous time schedule. If we had a straightforward capital gains tax we would have none of this complication and the Committee would be saved a great deal of trouble.

Amendment agreed to.

Sir E. Boyle: I beg to move, in page 59, line 13, at the end to insert:
(4) Where under sub-paragraph (8) of paragraph 8 above shares disposed of are identified with shares acquired by the same bargain, sub-paragraph (3) of this paragraph shall apply as if the disposal had preceded the acquisition.
(5) Where—

(a) under arrangements designed to postpone the acceptance of shares acquired. a person by a single bargain disposes of shares for transfer or delivery on a particular date or in a particular period and acquires them for transfer or delivery on a later date or in a later period; and
(b) under paragraph 8 above—

(i) the shares disposed of by that bargain are identified with shares previously acquired for transfer or delivery on the earlier date or in the earlier period; and
(ii) shares disposed of afterwards, but within six months of the date of that bargain, are identified with the shares acquired by that bargain;
then, subject to sub-paragraph (6) below, subparagraph (3) of this paragraph shall apply as if the disposal by that bargain had preceded the acquisition of the shares so identified with those disposed of.
(6) Where an acquisition of shares is more than once continued by such a bargain as is referred to in paragraph (a) of sub-paragraph (5) above, that sub-paragraph shall apply in relation to each bargain continuing the acquisition, but so that in relation to each such bargain sub-paragraph (ii) of paragraph (b) shall have effect as if the references to the date of and to the shares acquired by the bargain were references to the date of and to the shares acquired by the last of the bargains; and for the purposes of this sub-paragraph an acquisition continued by one bargain shall be treated as further continued by a later bargain, in so far as the shares disposed of by the later bargain are identified under paragraph 8 above with the shares acquired by the earlier.
This Amendment inserts three new sub-paragraphs in paragraph 9 of the Ninth Schedule designed to prevent certain anomalies which would otherwise arise in relation to contango arrangements on the Stock Exchange.
In reply to the hon. Member for Gloucester (Mr. Diamond), I think that in any scheme for a full scale capital gains tax or a straightforward speculative gains tax this problem would arise. The object here is perfectly simple. We do not on the one hand wish to tax people on profits which are not real profits and to do so unfairly. Equally, we want to ensure that those operations which ought to be subject to tax are in fact subject to tax. That is the principle we have tried to carry out in what, I agree, is a long and complicated Schedule.
Paragraph 9 provides that where a person sells shares at a loss and buys them back in a month no relief will be given for the loss under Case VII except on the subsequent disposal of the shares in question. These provisions are obviously desirable to prevent avoidance by quite deliberate artificial creation of losses. The Committee might agree that this rule ought not to apply where shares are bought back shortly after the sale in pursuance of a bear transaction because this is a transaction standing on its own and any losses here ought to be allowed just as any profit is taxed. Sub-paragraph (3) is designed to provide that where a person acquires shares and shares previously disposed of by him are identified with those shares under paragraph 8 any losses arising from the acquisition and disposal is to be outside the ambit of this paragraph.
The new sub-paragraph (4) deals with the situation which arises where a person contangoes a sale and under the Amendment we have just passed the con-tango purchased for one account is matched with the con-tango sale in the later account. Sub-paragraph (4) in the Amendment provides that sub-paragraph (3) is to apply to the con-tango bargain as if the disposal had preceded the acquisition, that is to say, it ensures that any loss here is outside the ambit of paragraph (9). Sub-paragraph (4) is closely connected with sub-paragraph (3) and one might say that it spells out the intention of the sub-paragraph more precisely.
The new sub-paragraph (5)—the rather complicated looking one—remedies an anomaly where a person contangoes the purchase of shares. I shall try to explain the sort of anomaly we are dealing with under this subsection. A speculator who has bought shares and sold them and finds the market moving against him, hopes to recover. He arranges the con-tango by selling for the first account and buying for the next at the making-up price. I have explained what that means. As the price for the shares has dropped, there will be a loss on the sale, but since he buys the shares back, the loss would not under the rule laid down in paragraph 9 be available to set against Case VII gains generally. It would be available only to set against the gain on the sale of the shares repurchased.


If the price recovers in the next account, and he makes a profit of the difference between his purchase price——

Mr. Woodrow Wyatt: Why does the hon. Gentleman want to make all these elaborate arrangements to protect people who buy and sell things they have not got? That is the sort of thing that leads to the great crash in Professor Galbraith's book. An enormous structure is being built to allow people to sell things they have not got.

Sir E. Boyle: I have read and greatly admired Professor Galbraith's book but, wherever one stands in regard to Professor Galbraith, one should not impose a tax on profits that people have not made. I merely say that when we are dealing with this admittedly difficult question, it is important to try to treat everyone alike in this way, in that we should only tax them on profits that really are profits. We rightly penalise those who manufacture profits for themselves by milking the Revenue—we have discussed that frequently for many years—but what is here proposed is, I think, fair——

Mr. Callaghan: Are we not making tax allowances for losses incurred by those who sell shares they have not got? If this is not a gamblers' charter, I do not know one.

Sir E. Boyle: I do not think that we are making tax allowances here. I believe that we are correcting what would otherwise be a perfectly genuine anomaly in the law——

Mr. Wyatt: Does not the Financial Secretary know that most reputable stockbrokers will not allow their clients to contango; and that by many it is regarded as monstrous for people to sell things they have not got, and buy things they do not wish to own?

Sir E. Boyle: With respect, I do not think the hon. Gentleman is right. For some time I was myself responsible for looking after a small trust in my own family. I never personally carried out this practice, but I have no reason to believe that it is a disreputable one. It is one that is legitimately carried out and, in any case, it is not against the

law, and I cannot see a compelling case for an anomaly which will certainly exist unless we alter the law, as we propose to do in sub-paragraph (5).
It is only fair that the Committee, and also the world—those who are interested —should know what is in the Government's mind, so I shall say just one more word on the subject of what sub-paragraph (5) is designed to do. If the price of the shares recovers, and the client or the operator—whichever word hon. Gentlemen prefer—makes a profit on that account, the loss on the con-tango sale can be set against that profit but, as the Bill now stands, he gets no relief for the loss if the shares fail to rise, even though they are sold within the six-month period. As things now stand, that is a genuine anomaly, and the new sub-paragraph accordingly provides that if the shares which had been the subject of the con-tango bargain are sold within six months of the date of the bargain, the con-tango bargain itself is to be taken outside the ambit of paragraph 9.
Finally, the new sub-paragraph (6) applies the rule that I have just described in sub-paragraph (5) to the case where the speculative purchase is the subject of a series of contangos.
That is the object of this Amendment. Perhaps, on another occasion, we could have a discussion on the whole operation of our Stock Exchange system —there is a very great deal to be said on all sides—but, granted the fact that the practice of the con-tango is long established in the City, there were, as the Bill stood, anomalies in the original Schedule, and I commend this Amendment to the Committee.

Mr. Mitchison: I am a child in these matters. Is the result of all these Amendments that people pay more tax or less tax?

Sir E. Boyle: The effect on the Revenue of all the Amendments that we are now considering to the Ninth Schedule is so small as not to be possible to quantify. What we are concerned with in the Amendments is not revenue but fair dealing as between all those who take part in transactions on the Stock Exchange.

11.15 P.M.

Mr. Diamond: I think that the Committee senses by now that in these two Amendments, particularly in the second one, there has been added to complexity the most utter illogicality. We started with a speculative gains tax, which is a tax on speculative transactions and a tax designed, therefore, to discourage speculative transactions by making them less beneficial. We are now carefully inserting Amendments by which we shall encourage speculation, the very thing we started out to tax. This is such absolute nonsense that, although the time is late, I should have thought that my right hon. and hon. Friends would feel disposed to share the views which many of us back benchers have that this is a matter which ought not to be encouraged in this way.
We have now gone right about face. Instead of discouraging speculation, we are deliberately setting out at 11.15 on a Monday night to encourage it by ensuring that every possible fairness is shown to a man who purely speculates, who has not the money with which to buy shares, who has no intention of owning the shares, who merely deals on the end of a telephone, and who is aided in doing this because of the practice of the City. It is well within the practice of the City that this is done. It is right that it should be known generally that this is one of the major activities of the great

City which we are upholding, that people should be there to receive telephone calls so that clients can buy what they are not going to purchase, out of money which they have not got, and we hope they have the credit for the small amount of interest which they will be called upon to pay sooner or later, or perhaps to receive. In this way they go on from month to month.

The Government are concerned with justice and fairness, in the most punctilious way. Let every contangoist, or whatever the noun may be, be assured that he can rely on the Government to see that in no circumstances will any of his speculations which result in a profit bear any greater tax than they would have done if he had been an ordinary individual who had literally bought something, been obliged to sell within six months, made a profit and, as a citizen, been willing to share his profit. There is no distinction to be drawn between the two. I should have thought, therefore, that my right hon. and hon. Friends would share the views which many of us back benchers have expressed or implied, that this is a matter which even at this late hour we should divide against.

Question put, That those words be there inserted:—

The Committee divided: Ayes 165, Noes 82.

Division No. 228.]
AYES
[11.18 p.m.


Agnew, Sir Peter
Cordeaux, Lt.Col. J. K.
Hall, John (Wycombe)


Atkins, Humphrey
Corfleld, F. V.
Hamilton, Michael (Wellingborough)


Balnlel, Lord
Crawley, Aldan
Harris, Reader (Heston)


Barber, Anthony
Critchley, Julian
Harrison, Col. Sir Harwood (Eye)


Barlow, Sir John
Crowder, F. P.
Harvey, Sir Arthur Vere (Macclesf'd)


Barter, John
Curran, Charles
Harvey, John (Walthamstow, E.)


Batsford, Brian
Currie, G. B. H.
Hastings, Stephen


Bidgood, John C.
Dance, James
Heald, Rt. Hon. Sir Lionel


Biffen, John
d'Avigdor-Goldsmid, sir Henry
Hendry, Forbes


Biggs-Davison, John
Deedes, W. F.
Hill, J. E. B. (S. Norfolk)


Birch, Rt. Hon. Nigel
Donaldson, Cmdr. C. E. M.
Hirst, Geoffrey


Bishop, F. P.
Drayson, G. B.
Hobson, Sir John


Black, Sir Cyril
du Cann, Edward
Hocking, Philip N.


Bossom, Clive
Duncan, Sir James
Holland, Philip


Bourne-Arton, A.
Elliot, Capt. Walter (Carehalton)
Hollingworth, John


Bowen, Roderic (Cardigan)
Errington, Sir Eric
Hooson, H. E.


Boyle, Sir Edward
Farr, John
Hopkins, Alan


Brewis, John
Fell, Anthony
Hornby, R. P.


Brooke, Rt. Hon. Henry
Fisher, Nigel
Howard, Hon. G. R. (St. Ives)


Brown, Alan (Tottenham)
Fletcher-Cooke, Charies
Hughes-Young, Michael


Bullard, Denys
Forrest, George
James, David


Carr, Compton (Barons Court)
Fraser, Hn. Hugh (Stafford A Stone)
Johnson, Dr. Donald (Carllsle)


Carr, Robert (Mitcham)
Fraser, Ian (Plymouth, sutton)
Johnson, Eric (Blackley)


Channon, H. P. G.
Gammans, Lady
Kerans, Cdr. J. S.


Chataway, Christopher
Gllmour, Sir John
Kirk, Peter


Chichester-Clark, R.
Glover, sir Douglas
Lancaster, Col. C. G.


Clark, Henry (Antrim, N.)
Goodhart, Philip
Legge-Bourke, Sir Harry


Clark, William (Nottingham, S.)
Cower, Raymond
Lewis, Kenneth (Rutland)


Collard, Richard
Green, Alan
Lilley, F. J. P.


Cooke, Robert
Gurden, Harold
Litchfield, Capt. John




Lloyd, Rt. Hon. Selwyn (Wirral)
Pearson, Frank (Clltheroe)
Talbot, John E.


Longbottom, Charies
Perclval, Ian
Taylor, Edwin (Bolton, E.)


Longden, Gilbert
Peyton, John
Taylor, Frank (M'ch'st'r, Moss Side)


Lubbock, Eric
Pickthorn, Sir Kenneth
Taylor, W. J. (Bradford, N.)


McLaren, Martin
Pitman, Sir James
Teeling, Sir William


Macleod, Rt. Hn. Iain (Enfield, W.)
Pott, Percivall
Thomas, Peter (Conway)


McMaster, Stanley R.
Prior, J. M. L.
Thompson, Richard (Croydon, S.)


Macmillan, Maurice (Halifax)
Proudfoot, Wilfred
Tiley, Arthur (Bradford, W.)


Macpherson, Niall (Dumfries)
Pym, Francis
Turner, Colln


Maginnis, John E.
Redmayne, Rt. Hon. Martin
Turton, Rt. Hon. Sir Gordon


Manningham-Buller, Rt. Hn. Sir R.
Rees, Hugh
van Straubenzee, w. R.


Markham, Major Sir Frank
Rees-Davies, W. H.
Vaughan-Morgan, Rt. Hon. Sir John


Mathew, Robert (Honiton)
Ridley, Hon. Nicholas
Vickers, Miss Joan


Matthews, Gordon (Meriden)
Roberts, Sir Peter (Heeley)
Wall, Patrick


Mawby, Ray
Rodgers, John (Sevenoaks)
Ward, Dame Irene


Maxwell-Hyslop, R. J.
Roots, William
Webster, David


Maydon, Lt.-Cmdr. S. L. C.
Ropner, Col. Sir Leonard
Wells, John (Maidstone)


Mills, Stratton
Royle, Anthony (Richmond, Surrey)
Wilson, Geoffrey (Truro)


More, Jasper (Ludlow)
Seymour, Leslle
Wise, A. R.


Nabarro, Gerald
Shaw, M.
Wolrige-Gordon, Patrick


Neave, Alrey
Shepherd, William
Woodnutt, Mark


Noble, Michael
Smith, Dudley (Br'ntf'd &amp; Chiswick)
Woollam, John


Oakshott, Sir Hendrie
Smithers, Peter
Worsley, Marcus


Osborn, John (Hallam)
Steward, Harold (Stockport, S.)



Page, Graham (Crosby)
Studhoime, Sir Henry
TELLERS FOR THE AYES:


Pannell, Norman (Klrkdale)
Summers, Sir Spencer
Mr. Finlay and Mr. Gordon Campbell.




NOES


Ainley, William
Harper, Joseph
Price, J. T. (Westhoughton)


Awbery, Stan
Hayman, F. H,
Probert, Arthur


Bennett, J. (Glasgow, Bridgeton)
Herblson, Miss Margaret
Redhead, E. c.


Blackburn, F.
Hough ton, Douglas
Rodgers, W. T. (Stockton)


Bowden, Rt. Hn. H. w. (Leics. S.W.)
Howell, Charles A. (Perry Barr)
Ross, William


Braddock, Mrs. E. M.
Howell, Denis (Small Heath)
Short, Edward


Bray, Dr. Jeremy
Hynd, John (Attercliffe)
Slater, Joseph (Sedgefield)


Callaghan, James
Irving, Sydney (Dartford)
Small, William


Castle, Mrs. Barbara
Janner, Sir Barnett
Soskice, Rt. Hon. Sir Frank


Cliffe, Michael
Jones, Dan (Burnley)
Spriggs, Leslie


Cronin, John
Jones, Elwyn (West Ham, S.)
Stewart, Michael (Fulham)


Cullen, Mrs. Alice
King, Dr. Horace
Stonehouse, John


Davies, G. Elfed (Rhonnda, C.)
Lawson, George
Thompson, Dr. Alan (Dunfermline)


Davies, Ifor (Gower)
Ledger, Ron
Thornton, Ernest


Delargy, Hugh
Lever, L. M. (Ardwick)
Watkins, Tudor


Diamond, John
Lewis, Arthur (West Ham, N.)
White, Mrs. Eirene


Dodds, Norman
Loughlin, Charles
Wllkins, W. A.


Dugdale, Rt. Hon. John
Mabon, Dr. J. Dickson
Williams, W. R. (Openshaw)


Edelman, Maurice
MacColl, James
Williams, W. T. (Warrington)


Fitch, Alan
Mallalieu, E. L. (Brigg)
Willis, E. G. (Edinburgh, E.)


Foot, Michael (Ebbw Vale)
Manuel, Archie
Wilson, Rt. Hon. Harold (Huyton)


Fraser, Thomas (Hamilton)
Mason, Roy
Winterbottom, R. E,


Galpern, Sir Myer
Millan, Bruce
Woof, Robert


Ginsburg, David
Mllne, Edward
Wyatt, Woodrow


Gordon Walker, Rt. Hon. P. C.
Mitchison, G. R.
Yates, Victor (Ladywood)

The following Amendment stood upon the Order Paper: In Schedule 9, page 62, line 15, at the end to insert:

5
13.—(1) Where under any arrangement between a company arid the persons holding shares in or debentures of the company or any class of such shares or debentures, being an arrangement entered into for the purposes of or in connection with a scheme of reconstruction or amalgamation, another company issues shares or debentures to those persons in respect of and in proportion to (or as nearly as may be in proportion to) their
holdings of the first-mentioned shares or debentures, but the first-mentioned or debentures are either retained by those persons or cancelled, then those persons shall be treated as exchanging the first-mentioned shares or debentures for those held by them in consequence of the arrangement (any shares or debentures retained being for this purpose regarded as if they had been cancelled and replaced by a new issue):


10




Provided that sub-paragraph (2) of paragraph 12 above shall not apply.


15
(2) Where any scheme of reconstruction or amalgamation involves the transfer of the whole or part of a company's business to another company, and the first-mentioned company receives no part of the consideration for the transfer (otherwise than by the other company taking over the whole or part of the liabilities of the business), then the first-mentioned company shall not be chargeable under Case VII by reference to the transfer in respect of its acquisition and disposal of any assets included in the transfer.

20
(3) In this paragraph "scheme of reconstruction or amalgamation" means a scheme 20 for the reconstruction of any company or companies or the amalgamation of any two or more companies, and references to shares or debentures being retained include their being retained with altered rights or in an altered form, whether as the result of reduction, consolidation, division or otherwise.

Sir E. Boyle: The Committee will see——

Mr. Diamond: On a point of order. Might I, with the greatest respect, ask you to reconsider your decision to call this Amendment, Sir Robert? I feel sure that you will be good enough to allow me to explain my reason for asking this. Although it might seem that I am asking the Chair to reconsider a decision, it is the general rule that an Amendment which is unintelligible or ungrammatical is not normally selected. I would refer you, Sir Robert. to line 6 of the Amendment, which reads:
… but the first-mentioned or debentures are either retained by those persons or cancelled …
I suggest that if I were to desire to put a Question to the Prime Minister asking what the right hon. Gentleman would prefer to do or go fishing——

The Deputy-Chairman (Sir Robert Grimston): Order. I would point out that the Amendment has been selected by Mr. Speaker. I think we should hear what the Minister has to say about it.

Mr. Callaghan: I was hoping, Sir Robert, that you would wish to hear what my hon. Friend the Member for Gloucester (Mr. Diamond) has to say. He is saying that the sentence he quoted does not make sense. We are used to receiving unintelligent Amendments from the Government, but in this case it is obvious that one or more words have been omitted. On no account can one read sense into the sentence as it stands. My hon. Friend was saying that, in these circumstances, we should not be asked to discuss an Amendment from which a word or words have been omitted.

The Deputy-Chairman: Order. I think that we must give the Financial Secretary a chance, to see whether he can make sense of it.

11.30 p.m.

Mr. Diamond: I hope that it will not be thought discourteous if I ask to be heard in making the submission which I am making to you, Sir Robert, with

the greatest possible deference and to save the Committee from reaching a most unsatisfactory position in which the Government, if not by virtue of the logic of their argument, then certainly by force of numbers, would be able to press through a Division, if necessary, this new Amendment which would introduce into our Statutes a Clause which would be neither intelligible nor grammatical. This would be perfectly obvious if you were to be good enough to read the sentence. It may be that Mr. Speaker selected the Amendment on looking at the matter generally or on looking at a draft which was not worded in precisely the same way as this one is worded on the Order Paper. It is quite clear that this does not read or make sense. I submit, therefore, that you should be good enough to reconsider your decision and should decide that the Amendment Should not be selected.

The Deputy-Chairman: The hon. Member is raising a point of order and I wish to hear what the Financial Secretary has to say on it.

Mr. Callaghan: I understand that you are calling the Amendment, Sir Robert, and that presumably means that the Financial Secretary proposes to move it. We ask, for our guidance and help, whether it is part of your duty in the Chair to ensure that the words put in front of us are grammatical and indeed intelligible. If it is clearly the case that some words are omitted from the Amendment through some mistake or carelessness, is it part of your duty to ask the Government to move such a defective Amendment when it is obvious that it cannot go on the Statute Book in this form?

The Deputy-Chairman: A point of order has been made from one side of the Committee and I should like to hear what the other side has to say.

Sir E. Boyle: On a point of order. It is my intention after moving the Amendment to ask you if you would accept a manuscript Amendment. [HON. MEMBERS: "Oh."] It is perfectly within the practice in the Committee that when


a mistake of this kind has been made— which is clearly a printing error for which I take full responsibility and apologise—for the Government to move a manuscript Amendment. I therefore ask whether in due course you will accept a manuscript Amendment to insert the word "shares" after the second "first-mentioned" in line 6.

Mr. Diamond: The Financial Secretary's speech concurs precisely with my own in saying that the Amendment is unintelligible and ungrammatical and therefore ought not to be selected.

The Deputy-Chairman: I am sure that the Committee is obliged to the hon. Member for Gloucester (Mr. Diamond) for having raised the point, but it appears that it is a printing error and in the circumstances I think that it would be best for the Committee to proceed. I would be prepared to accept a manuscript Amendment.

Mr. Callaghan: Further to that point of order. With respect, we have had a series of extremely slipshod explanations today on Clauses which cleanly have not been understood and now we have had another example which certainly would not have been picked up if it had not been for the care exercised by my hon. Friend the Member for Gloucester (Mr. Diamond). It is not his job. It is the Government's job. They have made a gross error. Someone should have checked the Amendment to see that the words were correct. Clearly that has not been done. There is no reason why the Committee should help the Government out. If they do not wish to move the Amendment as it stands they should accept responsibility for their own defects and should move a corrected Amendment tomorrow. I do not see why the Committee should help them tonight when obviously they have made a mistake.

Mr. Loughlin: Did I understand the Financial Secretary to say that he was seeking permission to move the Amendment as it stands and then subsequently to move a manuscript Amendment? The point I put is this. If there is an admission that the Amendment as it stands on the Notice Paper does not make sense, how can the Committee accept the moving of it and then subse-

quent action to make it make sense? I submit that, if the Amendment in its present form does not make sense, there can be no subsequent manuscript Amendment.

The Deputy-Chairman: I am obliged to the Gentleman for raising that point. I made a slight mistake. What the Chair does on these occasions—this has been done on both sides—is to ask the hon. Member concerned to move the Amendment in the amended form. That puts it in correct form, and that is what I propose to do on this occasion.

Mr. Callaghan: Is it the intention of the Government to proceed with the Amendment tonight? I shall ask them not to do so because I think that, if they do, it might make our progress a little slower than otherwise it might have been. We are quite ready to move ahead with Clauses and Amendments which are properly drafted and consider them in proper order, but there is no reason at all why the Committee should assist the Government in correcting what they should have discovered earlier and brought to our attention this evening without the Opposition having to do it.

Sir E. Boyle: May I say, Sir Robert, that we have already discussed two Amendments to the Ninth Schedule, and I think that it would be perfectly reasonable that we should discuss this Amendment also this evening. I have explained the matter, and I apologise to the Committee for the fact that a printer's error was made. It should have been picked up, and I apologise very much. Having some personal responsibility for a number of matters relating to the Notice Paper, I make a personal apology to the Committee here. I am sure we are all grateful to the hon. Member for Gloucester (Mr. Diamond) for having drawn the matter to our attention. However, now that the matter has been aired, I suggest, Sir Robert, that I should now proceed to move the Amendment in its amended form, with the manuscript Amendment which you have said you will accept.

Mr. Gordon Walker: On a point of order, Sir Robert. How can the Amendment appear before us in its amended form? Has it been amended?


I do not see how it can be. Until it is before the Committee, how can it come to us in its amended form?

The Deputy-Chairman: It is the practice of the House that an Amendment may be moved in a corrected form. It has been done on both sides.

Mr. Callaghan: Sir Robert, I take it that that is the practice where it is generally agreed that it should be done. Is it the practice of the Committee where there is no agreement about it?

The Deputy-Chairman: It is a matter for the Committee subsequently, if it refuses to accept it. I think that I can charge my memory with a case on this Finance Bill when an Amendment from the Opposition side of the Committee was moved in a corrected form because there had been a printer's error. It is not exceptional. Of course, it is up to the Committee. With respect, I suggest that the hon. Gentleman should move his Amendment in the corrected form, and then, of course, it will he up to the Committee entirely to decide what it does with it.

Mr. J. T. Price: Further to that point of order, Sir Robert. I know that hon. Members think that we are being difficult about this, but it is not the business of the Opposition to pull chestnuts out of the fire for the Government in their present state of mind. I put this to you as a matter of principle. We have been told that it is customary practice for which there are precedents that a manuscript Amendment may be put, and even though the text on the——

The Deputy-Chairman: If I may interrupt, what can be done is to move the Amendment in the corrected form; it is not a question of a manuscript Amendment.

Mr. Price: With respect, Sir Robert, I have not finished my submission to you, which I can make very briefly. First, I think that we ought to have the precedents on which this Ruling rests. If they are valid, we should consider them. Secondly, earlier in the debate today, we had a long discussion on another Clause which is linked with this as a matter of principle. We pressed the Treasury spokesmen to insert into the Bill certain definitions defining the terms which were printed on the Notice Paper,

and this they resolutely refused to do. If they are reluctant to insert definitions of ambiguous or vague terms such as those, how are we to expect anyone to construe or interpret legislation which starts off on the wrong foot by being drafted incorrectly, being corrected only by the interpolation of a manuscript Amendment of which no notice has been given to anyone?
If manuscript Amendments can be brought to the Committee in these circumstances, the Order Paper can be left vague and hon. Members can come here not properly briefed on what we are discussing if we are to have the casual admission of drafting Amendments on the spur of the moment because an error has been pointed out. In addition to all that has been said, may I point out that the House of Commons is not entitled to permit Ministers so easily to correct their own mistakes by suggesting that manuscript Amendments should be inserted? At this hour of the night, it is an abuse of the procedure of the Committee. I strongly object of my own behalf and I hope that my hon. Friends will continue to object.

The Deputy-Chairman: Perhaps I can help the Committee by referring to Erskine May, at page 406:
Also, on proposing the question, an opportunity may be taken to rectify any irregularities in a motion which has been moved without notice, or any irregularities which, though notice may have been given, have previously been overlooked.
If this applies to a Motion, a fortiori it applies to an Amendment.

Mr. Diamond: Will you be good enough to hear me one moment further, Sir Robert? If the merit of the proposed Amendment is considered—its substance as well as what is lacking in its present basis—you might take a different view. I was charged with the responsibility of considering it and trying to understand what it meant and then, if appropriate, addressing the Committee upon it. On one's first reading, it became obvious that it meant nothing.
I do not know for certain to which irregularity you refer, Sir Robert. It is well known that a minor irregularity can be put right by the Chairman proposing the Question in its amended form. For two very good reasons, however, what has happened now cannot be considered an irregularity. First, I can guess, but


I do not know—nobody has said—what verbal Amendment should be accepted to make sense of the Amendment. I do not know whether it is an insertion between "first-mentioned" and "or", although I suspect that it is, and I suspect that it is the word "shares". Nobody has said anything about it so far. [Interruption.] If anybody has done, I apologise. I did not hear. Secondly, I cannot make sense of the following words "either retained … or cancelled". It seems to me utter nonsense on the merit of it that the same treatment should apply when shares are either retained or are cancelled, which is precisely the opposite.
Having read the first part of the sentence, one then comes to the second part. I was unable to decide whether there was a further mistake or whether the Government meant what they said and that it was merely unintelligble because these things are by nature unintelligible. For these two reasons, this matter is a long way from the normal practice in the case of a minor inaccuracy, such as the use of the plural where it should be the singular, which the House would not wish to do other that accept in its amended form.

Mr. Callaghan: On a point of order. I have always thought that an irregularity of that sort was, as my hon. Friend the Member for Gloucester (Mr. Diamond) suggests, the question of an omission of a comma or colon or something like that. Are you ruling, Sir Robert, that it has hitherto included the insertion of a word or words into a Clause? We have been reading the Order Paper all day wondering whether we would hear an Amendment moved to this one, but the Government did not know that anything had been left out. They now say that only one word is left out. Like the housemaid's baby, it may be only a little one, but when the Government think about it they may decide that they have left out a whole sentence. As it is, in one sentence they have managed to compress over a hundred words. Are you ruling, Sir Robert, that hitherto in correcting an irregularity we have been able to insert words and that we should proceed from there?

11.45 p.m.

The Deputy-Chairman: I understood from the Minister that this was a printer's error. Where there has been a printer's error, we frequently allow a corrected Amendment or Motion to be moved. I understand that that is all that is the matter here. Therefore, I really would suggest to the hon. Gentleman, with respect, that the Minister should be allowed to move the Amendment in the corrected form, which he says is perfectly simple because it is only a printer's error which has occurred. Perhaps in the course of moving it he can give a little further explanation. That is the position as I understand it. In these circumstances, I think I am quite within my duties in the Chair in allowing the Amendment to be moved in the corrected form.

Mr. Callaghan: I follow that, Sir Robert, but we have 11 pages of the Chancellor's Amendments and new Clauses on the Order Paper. It is a very great number, and all arise out of the speculative gains tax. Although we have been told in passing by the Financial Secretary that it is a printer's error, on the first occasion he did not say that. He started to say it but corrected himself. He said "an error". He has now checked up on it and decided that it is a printer's error. I hope that is right.
But I really think that, in view of the fact that we have considered pages and pages of this sort, we are entitled to ask the Government to withdraw the Amendment tonight, take it away, look at it again, consider it, and bring it back to us having——

The Deputy-Chairman: The hon. Gentleman cannot do that on a point of order.

Mr. Callaghan: In that case, Sir Robert, I beg to move.
That the Chairman do report Progress and ask leave to sit again.
I do this, Sir Robert, for the reason that I was giving. I do not wish to detain the Committee on this, but it seems to me that the Government owe a duty to us. No one can complain that we have been uncooperative. We have worked through the Bill steadily and given hon. Members reasonably early nights. We have all made our points and gone home. But we have reached


a juncture where the Government have made a mistake, and we are entitled to tell the Government that they should withdraw the Amendment and let us get on with the Amendments Which are properly drafted, and when the defective one is brought back to us we will give it the fair consideration that we have given to the Bill so far.
I see no reason why we should allow the Government this Amendment when they have this afternoon and this evening given us a number of explanations of Clauses which those who have been present will agree have not been satisfactory. They have not been satisfactory. I insist on this point for this reason. I have a very great respect for the abilities of the Financial Secretary, but I must say of him this afternoon that he has not betrayed 100 per cent. understanding of all that he has been saying to us. Anyone who has listened to the debates will agree with that. We had a singular illustration of it on the last Amendment that we were discussing. I do not wish to be offensive to the hon. Gentleman at all. If he cannot understand it, I am sure we cannot. I have frequently had to ask him to go more slowly. But when he, clearly, is not under-standing it, how can we be certain that this is merely one imperfection, one word?
We are entitled to ask the Government to take the Amendment away, look at it again and put it on the Order Paper in proper form. If they can explain it then, well and good; it will be a little better than some of the things we have heard this afternoon. I consider that we are entitled to ask the Chairman to report Progress and ask leave to sit again so that we may consider the Clause when it is properly drafted.

Mr. Brooke: I think I appreciate the position. If the Government should accept the Motion, it is only too clear that we should have to sit later tomorrow night. So far as I had understood, there had been a general hope on both sides of the Committee that we should complete the Recommittal and Report stages of the Bill in a workmanlike manner without sitting into the early hours of the morning, which, I think, by common consent, is an unfortunate way to have to treat the important Clauses of an important Bill.
I must confess that I am a little surprised that after my hon. Friend the Financial Secretary has given an unqualified apology for a printer's error, that has not been accepted. You have reminded us, Sir Robert, that at an earlier stage in our proceedings there was a flaw in an Opposition Amendment and yet the Committee raised no objection to considering it after the error had been corrected, and the Committee then proceeded with its business.
I have been a Member for a very long time and so far as I know the normal course is that if an honest and honourable apology is made for what is obviously a printer's error, the Committee, or the House, accepts that and we proceed. But I am in the hands of the Committee and if the Committee would prefer to suspend our proceedings now at this stage, all of us knowing that it will mean sitting later tomorrow night, I do not wish to resist the sense of the Committee. I am in the hands of the Committee and I hope that it is in accordance with the traditions of the House and the Committee that I should reply to this Motion in this sense.

Mr. Callaghan: Would it not be possible for the Government not to move this Amendment and for us to proceed with the remaining Amendments, the Government moving to recommit the Bill again tomorrow in order to deal with this matter? Why do not the Government do that?

Mr. Brooke: I do not claim to be expert on the possible procedures of the Committee. It is clear that the Government wish this Amendment in its correct form to be made to the Bill, but I thought that the hon. Member for Cardiff, South-East (Mr. Callaghan) moved this Motion on the assumption that the proceedings were to be brought to an end. On the other hand, if there is a method by which, without infringing any normal practices and traditions of the House, we can proceed to complete the Committee stage and make rather further progress today and then revert to this matter, we should Clearly be saving time. If the hon. Member would care to withdraw his Motion, we will see whether we can proceed in that way.

Mr. Loughlin: Can you guide the Committee on this issue, Sir Robert?


The Chief Secretary has indicated that he might withdraw this Amendment tonight and return to it tomorrow in its corrected form if that could be done. Could we speed up the proceedings by your indicating whether it is possible for that procedure to be adopted, or whether we have to proceed with this Motion? I should like to make some comments about why this Motion should be accepted, but 1 do not want to detain the Committee if it is possible to accept the Chief Secretary's suggestion

The Deputy-Chairman: It is possible to recommit the Bill after Report stage, but I cannot say more than that.

Mr. Callaghan: On that basis, has the Chief Secretary anything to say to the Committee?

Mr. Brooke: I must naturally be guided by what you say, Sir Robert. I would not hold myself up as an expert on the procedure of the House and its Committees. However, in view of what you say, I understand that it would be proper for us—at any rate, that we should not be breaking the traditions and practices of the House of Commons —if we proceeded this evening to omit this questionable Amendment and to complete the Committee stage and then go on, to the Report stage, after which we can still, recommit the Bill.
I do not think that hon. Members wish to sit unnecessarily late tomorrow night. Therefore, on behalf of my right hon. and learned Friend, I am prepared to suggest that we proceed in this way. The Amendment in question will not be moved tonight. We shall seek to insert it in its proper form at a later stage, and perhaps we can now do a bit more work and have a workmanlike day tomorrow. I hope the hon. Gentleman will feel that I have met him fairly.

The Deputy-Chairman: I should like to quote my authority for my Ruling. Erskine May says on page 574:
A bill may be recommitted, if desired, to a Committee of the whole House, a standing committee or a select committee, and a motion for this purpose may be made at the beginning or end of the consideration stage, between the consideration and third reading, or on the third reading.

Mr. Callaghan: Sir Robert, we are all indebted to you for your help in this matter. As I said, I have no desire to

hold up the business here. I acknowledge the way in which the Chief Secretary has met us. I had no intention of being unfair to the Financial Secretary, who I thought made a full and complete explanation and apology for what had been done. He is a most courteous man; much more courteous than I am on these occasions. None of us has any personal feelings about him, but there is no reason why we should expedite the Government's mistakes. The Government have accepted this, and we can now make progress.
I beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.

Sir E. Boyle: I beg to move, in page 63, line 42, at the end to insert:
15.—(1) A person shall not be chargeable under Case VII in respect of an acquisition and disposal of land by reference to a disposal to an authority exercising or having compulsory powers, if that person had neither—

(a) acquired the land at a time when he knew or might reasonably have known that it was likely to be acquired by the authority; nor
(b) taken any steps by advertisement or otherwise to dispose of the land or to make his willingness to dispose of it known to the authority or others.
(2) In this paragraph "authority exercising or having compulsory powers" means, in relation to any disposal of land, a person or body of persons acquiring the land compulsorily or who has or have been, or could be, authorised to acquire it compulsorily for the purposes for which it is acquired, or for whom another person or body of persons has or have been, or could be, authorised so to acquire it.
In view of what the hon. Member for Cardiff, South-East (Mr. Callaghan) said, I am sorry that lilt is I who have to start this discussion. As the Committee sees, this is the last Amendment to the Ninth Schedule. It adds a new paragraph to exempt from the charge under Case VII, subject to certain conditions, a disposal of land to an authority exercising or having compulsory powers.
During the earlier stages of the Bill my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) moved an Amendment which, among its other provisions, would have exempted from Case VII a disposal of land which was compulsorily acquired from the vendor, and in reply to the Amendment my hon. Friend the Economic Secretary


pointed out that there were difficulties in accepting the Amendment in relation to the compulsory acquisition of land.
Simply to exempt land compulsorily acquired would mean that if an authority wished to acquire land and agreed a mutually satisfactory price with one person, but had to use its compulsory powers in relation to another, the person who had agreed a price would be caught out far Case VII tax, whereas the man who held out so that compulsory powers had to be used would escape.
My hon. Friend said that he would look at this matter again to see whether anything could be done to exclude from the charge what I might call the bona fide case of the disposal of land where there are compulsory powers. The Amendment meets the difficulties which would arise from exempting only cases where compulsory powers were exercised, because this paragraph exempts cases where the acquiring authority could have used compulsory powers to get the land.
I believe that this is a reasonable solution to a difficult question. I have had the help of my right hon. and learned Friend the Attorney-General on this Amendment, and I hope that the Committee will accept it.

12 m.

Mr. Mitchison: What is the purpose of the Amendment? Why should this concession be given to people who sell to a local authority, either because the local authority has powers of compulsory acquisition and exercises them or, having those powers, does not exercise them? There is no question in the Bill covering motive, or anything of that sort. What presumably happens in a case of this sort is that somebody has bought land within the previous three years and it is compulsorily acquired by the local authority. The probability is that the price at which it will he acquired is a good bit higher than the price at which it was bought—and the increase is due, in part, to the needs of the local authority and to matters which are entirely without the volition and choice of the present owner. He has made a lucky purchase.
It appears to he the idea on the benches opposite that compulsory acquisition is a form of persecution. We

on this side of the Committee regard it as the discharge of a public duty by a local authority. The Government brought in a Bill with six Clauses and heaven knows how many assumptions to make it clear that on compulsory acquisition market value—which they dispose of in a sentence today—was to be paid. and I cannot see what the difference is between a person who compulsorily receives more than what he paid for land a short time ago and the person who, by way of a bargain made without any reference to compulsory powers, makes a similar profit. The only difference is that without the former person doing anything about it he has received a short-term gain of the kind which it is the object of the Bill to tax.
Why on earth should this kind of short-term gain be exempted from taxation? It is said that the compulsory element makes some difference—or the threat of compulsion. Logically, I do not see that, but if that were the position, what about the man who buys shares over a long period from a bank and is compelled to sell them because the bank will not go on lending him money any longer? He is compelled, just as much. One kind of compulsion is exactly the same as the other kind, for the purposes of the Bill. To suppose that in the mercantile, haggling world people are always free agents seems to me a supposition that is contrary to all good sense.
The whole purpose of the Bill is to provide that if, without any action on their part, people receive a short-term gain which it is reasonable to treat as income in their hands, that gain should be taxed. I do not go into the larger question whether there should be more tax, or whether there should be a proper capital gains tax. I am taking simply what is in the Bill—short-term gains. This is a short-term gain. What on earth has the question whether a local authority exercises or does not exercise its compulsory powers got to do with the fact that a man has made a pretty good profit in a very short time—in this instance out of the obvious needs of the community and the requirements of public service? I cannot see any logic in the Amendment, and I hope that the Committee will turn it down.

The Attorney-General: I am sorry that the hon. and learned Gentleman sees no logic in the Amendment. It would be unfair on the taxpayer if the Amendment were not accepted. I am not questioning the exercise by local authorities and other bodies of their right to acquire compulsorily; that point is not in issue. The question here concerns the liability for tax of the vendor. The hon. and learned Gentleman referred several times to short-term gains. We are referring particularly to short-term gains of a speculative character, and I cannot regard a man who has bought land which he desires to retain and which is compulsorily acquired from him within the three-year period as a person who has received, or could be characterised as receiving, a speculative gain. He may want to hold it for years. If this Amendment is not made, I ask the hon. and learned Member to bear in mind, the delays in compulsory purchase are likely to be considerably prolonged in the hope that the interval of time between acquisition and compulsory sale will exceed three years.
I think that in principle it is right to except the compulsory purchase of land from the scope of Case VII, subject to the two qualifications contained in the proposed Amendment. If we are to except compulsory purchase it follows that we must also except purchase made by a local authority or other body which has compulsory powers but which is not compelled to use them because the vendor agrees to sell. The exception must be qualified by the two exceptions contained in this Amendment. First, the vendor will not be entitled to the exemption of he acquired the land at a time
when he knew or might reasonably have known that it was likely to be acquired by the authority.
That obviously is desirable because it would stop a person buying land speculatively in the hope of selling it to a local authority and thereby evading tax under Case VII.
The second exception is that if a man is entitled to sell his land and has advertised it or taken other steps to indicate that he is willing to dispose of it and made that known to other people, he is in the category of a willing vendor, not someone who has been compelled to sell against his will. The fact that

the local authority is the purchaser should not exempt him frown charge under Case VII. if this Amendment is accepted, that person will not be exempted from change under Case VIT. All that is exempted from a charge under Case VII is a man who has acquired land within the three-year period without any ground for knowing that it might be acquired by the local authority and who is compelled to sell against his will. I do not regard that man as coming within the category of anyone engaging in a speculative transaction.

Mr. Mitchison: Why "against his will"? There is nothing in the Clause about that. All that is necessary is that the local authority purchasing should have power to purchase compulsorily. The man may be well content to sell to the local authority at an agreed price considerably higher than he would otherwise get.

The Attorney-General: It may be that he is able to do so, but for the purpose of my argument I am taking the case of the man who acquired the land and had it taken away from him by the exercise of compulsory power. I am asking the Committee to consider that case. I do not believe that it can be regarded as fair that that man should be treated as obtaining, or seeking to obtain, a speculative gain.
If one accepts that proposition, one has to go a stage further and deal with the sale which takes place where there is power to exercise compulsory acquisition although in fact it is not exercised. That is a frequent occurrence. If we do not cover that also it means that more and more because people will not agree to sell voluntarily to a local authority they will pursue the compulsory purchase procedure to the end in the hope of getting a tax-free price.
I express my view, and I think my hon. Friends agree, that it is unfair to treat the unwilling vendor, the man who is not wanting to sell, as if he were engaging in a speculative transaction. Of course the hon. and learned Member is in favour of a complete capital gains tax. His arguments seem to be addressed to the proposition that anyone who made a profit by selling property of any kind should be liable to


tax. That is not what the Bill is intended to do.
I hope that I have made it clear to the Committee that there are these two safeguards in the Bill which we think particularly important. First, the acquisition at the commencement must not have taken place when the buyer of the land who later sells to the local authority knew or might reasonably have known that it was likely to be acquired by the authority. Secondly, if he has put it in the market, or given any indication that he wants to sell it, obviously he should be treated like any other person selling land acquired within three years, as if it were a speculative gain, and it will not alter its character because, having seen it put in the market, the local authority says, "We want it for a public or local purpose".

Mr. Diamond: The right hon. and learned Gentleman bases the whole of his case on the fact that this would be assimilating a transaction of this kind with a speculative gain. Where, in the whole of the Bill, and its Schedule, does he find the phrase "speculative gain"? The distinction is not between speculative gain and non-speculative gain but between long-term gain and short-term gain.

The Attorney-General: The hon. Gentleman must have heard it said many times in the course of the long debates on the Bill that this Case VII charge is intended to be a tax on speculative gains and not a capital gains tax.

Mr. Mitchison: I have also heard it said during the course of the Bill that there was no intention to draft legislation on matters of motive and intention. There is not a word in the Bill about motive or intention, and I prefer to take the Bill as it is drafted when I am considering an Amendment.
We have been told by Treasury Ministers that they have done that deliberately, and I think that they are right to do it. What they intend to tax is short-term gains. It is clear that this is a short-term gain, and the only way of getting out of taxing it is by bringing in a matter which is quite irrelevant to the rest of the Bill, which has been disclaimed as irrelevant more than once, and saying that it is not the man's fault,

for he did not intend to sell to the local authority. Who knows whether he intended to do so and whether he was speculating on the probability, in his own mind, that the local authority would be compelled to buy that plot of land for that purpose?
The moment that we start legislating about people's intentions we get into inextricable difficulties, and the moment we start basing an Amendment of this sort on grounds which do not appear in the Bill but which exist only in the right hon. and learned Gentleman's intelligence, we get into difficulty. I hope that the Committee, without taking much longer about it, will reject the Amendment.

Sir Henry d'Avigdor-Goldsmid: As I had the fortune to introduce this suggestion to the Government's attention, it is only proper that I should say "Thank you" to them for giving effect to the suggestion. It is interesting to note that the great indignation of the hon. and learned Member for Kettering (Mr. Mitchison) has been reserved for this occasion. When we first talked about the terms of compulsory purchase as affecting not only the great landowners but particularly the small farmers, I did not notice the hon. and learned Gentleman present or the hon. Member for Westhoughton (Mr. J. T. Price).

Mr. J. T. Price: If the hon. Member is referring to me, I would point out that I have been in the Committee all night, since the beginning of the debate, and have taken an active part throughout. I deeply resent that suggestion addressed to me. The hon. Member has not been in these precincts until recently.

Sir H. d'Ayigdor-Goldsmid: I was referring to the Committee stage of the Bill, when this was first introduced. I apologise for having got the constituency wrong; I meant the hon. Member for Gloucester (Mr. Diamond). I apologise for the confusion between the two hon. Members.
12.15 a.m.
It is clear that this is a measure of equity which will appeal to the great majority of people, who are not greatly concerned with motives but who see the situation of the farmer who is dispossessed by reason of a road building


programme and who has to build up his life again elsewhere and who should have his capital intact to do so I do not think that there is more to it than that.

Mr. Callaghan: This does not apply to an owner-occupier. He does not pay tax on his capital gain anyhow.

Sir H. d'Avigdor-Goldsmid: I was not speaking about an owner-occupier. I was speaking about a farmer who has to move. I know that this has been a long and tiring day. I am sorry that I have not been here all day. I have been upstairs on other matters, but I have been present during the whole of the debate on this Amendment. I was here in Committee also. I wish to repeat what I said when I rose. I thank the Government for having accepted my suggestion.

Dr. Horace king: May I put a point to the Committee which I do not think has been mentioned in this short debate? When an authority acquires a piece of property compulsorily, it pays the district valuer's price. It is a good price. If the Amendment is accepted, everybody who is likely to have dealings with a local authority will be tempted to resist so that compulsory purchase will take place and he will get the tax exemption provided by the Amendment.

Mr. Charles A. Howell: I am interested in the Amendment. During the last two or three days I have received a letter from the Ministry of Transport telling me that the extension to the M.1 in the Birmingham area will not take place for about two years. The Ministry has to negotiate for the land. If anyone has bought this land within three years, it is safe to assume that the agent for the Ministry will be unable to arrive at a price. The person just will not sell. He will not agree a price. We all know what will happen. I have known it happen before. The owner of the land —he may be one of the farmers referred to by the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid)—will simply say, off the cuff, off the record, behind the scenes, or whatever it may be, "I will not resist it if you apply for a compulsory purchase order". He has merely to say, "Let us cut out the

cackle and stop arguing. You go ahead and get a compulsory purchase order". It will then be the district valuer's figure. Tax will not be paid on it. It would have been much better for the Chancellor of the Exchequer to have left this tax out altogether, because all that we have been doing ever since he put it in is trying to find loopholes. That is all this is. It is a loophole to enable people to avoid paying tax which would normally have to be paid if the land was sold within three years of acquisition.

Mr. A. R. Wise: I want to clear up a point made by the hon. Member for Southampton, Itchen (Dr. King), who has not read far enough in the Schedule. This point is covered where something is sold without a compulsory purchase order, if such an order were likely to have been made had the sale not been agreed to
I want to refer briefly to the argument of the hon. and learned Member for Kettering (Mr. Mitchison). He accused my hon. Friends and I of a lack of logic. There is a distinction between selling something for a profit of one's own free will and having it taken from one when one does not want to sell.
If a failure to recognise the distinction is not the height of illogicality, I was never instructed in the art of false syllogism. There was an occasion during the war when a very good picture was painted on the wall of someone's house. Subsequently, against the will of both the regiment which used the house and of the owner of the house, it was acquired by the local authority, and certain compensation was paid. No one could say that the owner of the house had the least desire to sell the picture; indeed, he would have been very content to have paid quite a large sum to keep it on the wall. But it was taken away, and same compensation was paid.
Does the hon. and learned Gentleman really suggest that in such a case a tax would have been fair? That is the point he put to us. There is a difference——

Mr. Mitchison: The answer is that I do not know under what powers a local authority can compulsorily purchase Rex Whistler's, or anyone else's, pictures.

Mr. Wise: The local authority did it under the Defence of the Realm Act, or under the war-time regulations. It was


certainly acquired compulsorily, and now it is in Brighton Pavilion for all of us to see. That was a profit to the owner—indeed, he paid nothing for t— and, if the hon. and learned Gentleman's contention is maintained, under the present arrangement it would have been taxable. I cannot see that that is just; it certainly is not logical, and I trust that we shall be given a chance to reject it in a Division. There must be enough hon. Members opposite to enable a couple of Tellers to be found, unwilling though they were on the last occasion. We shall be delighted to register our suffrages.

Mr. Archie Manuel: It is abundantly clear that the Government are quite determined to get some provision such as this on the Statute Book in order to avoid the obligations that the three-year period would entail. As members of local authorities, many of us know of occasions when an authority, desirous of acquiring land for housing development, has tried to get the land without applying for compulsory powers because that procedure can mean a long time-lag that can throw a programme out of gear. It therefore does everything possible to arrive at a voluntary agreement with the owner of the land.
This Amendment will merely divest local authorities of a larger sum than necessary. Sub-paragraph (a) states:
… acquired the land at a time when he knew or might reasonably have known that it was likely to be acquired by the authority…
How will that be proved? Is that not just a form of words without a meaning or, if it has a meaning, how can one prove the intention? I should have thought that when the right hon. and learned Gentleman gave his consent to the provision about short-term gains of this character he would have been logical about it, and certainly would not have had this escape clause put in.
I hope that we shall be quite stubborn about this, and recognise that, as my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has said, this is a short-term gain. I hope that we will stick to our guns, and vote against the Amendment.

Mr. John E. Talbot: I wonder if hon. Gentlemen opposite who

are fighting the Amendment so vigorously realise the result their action would have on our housing policy. I have experience of both sides of the fence, as a member of a local authority and as one acting for people forced to sell their premises to local authorities.
In smaller schemes particularly an enormous amount of time and expense would be saved if property acquisitions could be by negotiation. I believe, too, that the element of time-lag which is essential in our present procedure is fair to everyone, although it could be substantially shortened if only we could bring the man who is willing to cooperate on to the same footing as the man who is not. That is just what the Clause seeks to do.
On the point made by the hon. Member for Central Ayrshire (Mr. Archie Manuel) about sub-paragraph (a), it will be perfectly easy to pinpoint the time because any scheme by a local authority for the acquisition of property is always advertised and debated and it might therefore be said that the commencement of the time when a man knew, or might reasonably have known, that it was likely to be acquired by the authority was the moment at which the authority publicly said so.

Mr. Manuel: Surely the hon. Gentleman is aware that leakages often occur before the time of the advertisement. This has been proven time and again.

Mr. Talbot: Mr. Talbot: Oh.

Mr. Manuel: The hon. Gentleman, having experience of both sides of the fence, must be aware that councillors talk to their friends and may drop a hint before the advertisement has appeared.

Mr. Talbot: I would not take as low a view of the standard of public life as the hon. Member for Central Ayrshire. I still say that for the purpose of any judicial proceeding—and taxation is enforced by judicial proceedings—the commencement is the publication date of the authority's intentions.
If a man takes steps as a result of an advertisement, then obviously that is a public act and can be deemed to be the commencing time when the person wanted to dispose of the property. He


does not even have to do it by advertisement, for the word "otherwise" would include any form of voluntary attempt to dispose of the property.
Thus the purpose of the Clause is to bring the voluntary sale into line with the compulsory one. Surely that is something we all want to encourage, because if a man is prepared to co-operate —and in my experience a large number

of such people are getting fair compensation from the local authorities—he should not be put in a worse position than the man who sticks out until the last moment for a compulsory acquisition order.

Question put, That those words be there inserted:—

The Committee divided: Ayes 132, Noes 66.

Division No. 229.]
AYES
[12.29 a.m.


Atkins, Humphrey
Gower, Raymond
Osbom, John (Hallam)


Barber, Anthony
Green, Alan
Page, Graham (Crosby)


Barter, John
Gurden, Harold
Pannell, Norman (Kirkdale)


Batsford, Brian
Hamilton, Michael (Wellingborough)
Pearson, Frank (Clitheroe)


Bidgood, John C.
Harris, Reader (Heston)
Peyton, John


Biffen, John
Harrison, Col. Sir Harwood (Eye)
Pickthorn, Sir Kenneth


Bishop, F. P.
Harvey, John (Walthamstow, E.)
Pitman, Sir James


Black, Sir Cyril
Hastings, Stephen
Prior, J. M. L.


Bossom, Clive
Heald, Rt. Hon. Sir Lionel
Pym, Francis


Bourne-Arton, A.
Hendry, Forbes
Redmayne, Rt. Hon. Martin


Bowen, Roderic (Cardigan)
Hill, J. E. B. (S. Norfolk)
Rees, Hugh


Boyle, Sir Edward
Hobson, Sir John
Ridley, Hon. Nicholas


Brewis, John
Hocking, Philip N.
Roberts, Sir Peter (Heeley)


Brooke, Rt. Hon. Henry
Holland, Philip
Rodgers, John (Sevenoaks)


Brown, Alan (Tottenham)
Hornby, R. P.
Roots, William


Bullard, Denys
Hughes-Young, Michael
Ropner, Col. Sir Leonard


Campbell, Gordon (Moray &amp; Nairn)
James, David
Seymour, Leslie


Carr, Compton (Barons Court)
Johnson, Dr. Donald (Carlisle)
Shaw, M.


Channon, H. P. G.
Johnson, Eric (Blackley)
Smith, Dudley (Br'ntf'd &amp; Chiswick


Chataway, Christopher
Kerans, Cdr. J. S.
Smithers, Peter


Chichester-Clark, R.
Kirk, Peter
Studholme, Sir Henry


Clark, Henry (Antrim, N.)
Legge-Bourke, Sir Harry
Summers, Sir Spencer


Clark, William (Nottingham, S.)
Lewis, Kenneth (Rutland)
Talbot, John E.


Collard, Richard
Lilley, F. J. P.
Taylor, Edwin (Bolton, E.)


Cordeaux, Lt.-col. J. K.
Litchfield, Capt. John
Taylor, Frank (M'ch'st'r, Moss Side


Crawley, Aidan
Lloyd, Rt. Hon. Selwyn (Wirral)
Taylor, w. J. (Bradford, N.)


Crowder, F. P.
Longbottom, Charles
Teeling, Sir William


Curran, Charles
Longden, Gilbert
Thomas, peter (Conway)


Currie, G. B. H.
Macleod, Rt. Hn. Iain (Enfield, W.)
Thompson, Richard (Croydon, S.


d'Avigdor-Goldsmid, Sir Henry
McMaster, Stanley R.
Tiley, Arthur (Bradford, W.)


Donaldson, Cmdr. C. E. M.
Macmillan, Maurice (Halifax)
van Straubenzee, W. R.


Drayson, G. B.
Macpherson, Niall (Dumfries)
Vaughan-Morgan, Rt. Hon. Sir John


du Cann, Edward
Maginnis, John E.
Vickers, Miss Joan


Elliot, Capt. waiter (Carshalton)
Manningham-Buller, Rt. Hn. Sir R.
Wall, Patrick


Farr, John
Markham, Major Sir Frank
Ward, Dame Irene


Finlay, Graeme
Mathew, Robert (Honiton)
Wells, John (Maidstone)


Fisher, Nigel
Matthews, Gordon (Meriden)
Wilson, Geoffrey (Truro)


Fletcher-Cooke, Charles
Mawby, Ray
Wise, A. R.


Forrest, George
Maxwell-Hyslop, R. J.
Wolrige-Gordon, Patrick


Fraser, Hn. Hugh (Stafford &amp; Stone)
Maydon, Lt.-Cmdr. S. L. C.
Woodnutt, Mark


Fraser, Ian (Plymouth, Sutton)
Mills, Stratton
Woollam, John


Gammans, Lady
More, Jasper (Ludlow)
Worsley, Marcus


Gilmour, Sir John
Nabarro, Gerald



Glover, Sir Douglas
Neave, Airey
TELLERS FOR THE AYES:


Goodhart, Philip
Oakshott, Sir Hendrie
Mr. Noble and Mr. McLaren.




NOES


Ainsley, William
Fraser, Thomas (Hamilton)
Lewis, Arthur (West Ham, N.)


Bennett, J. (Glasgow, Bridgeton)
Galpern, Sir Myer
Loughlin, Charles


Blackburn, F.
Gordon Walker, Rt. Hon. P. C.
Mabon, Dr. J. Dickson


Bowden, Rt. Hn. H. W. (Leics. S.W.)
Greenwood, Anthony
Mallalieu, E. L. (Brigg)


Braddock, Mrs. E. M.
Hannan, William
Manuel, Archie


Callaglian, James
Harper, Joseph
Mason, Roy


Castle, Mrs. Barbara
Hayman, F. H.
Millan, Bruce


Cliffe, Michael
Herbison, Miss Margaret
Milne, Edward


Cronin, John
Houghton, Douglas
Mitchison, G. R.


Cullen, Mrs. Alice
Howell, Charles A. (Perry Barr)
Noel-Baker, Francis (Swindon)


Davies, G. Elfed (Rhondda, E.)
Howell, Denis (Small Heath)
Pentland, Norman


Davies, Ifor (Gower)
Irving, Sydney (Dartford)
Price, J. T. (Westhoughton)


Delargy, Hugh
Janner, Sir Barnett
Probert, Arthur


Diamond, John
Jones, Elwyn (West Ham, S.)
Redhead, E. C.


Dodds, Norman
King, Dr. Horace
Rodgers, W. T. (Stockton)


Dugdale, Rt. Hon. John
Lawson, George
Ross, William


Fitch, Alan
Ledger, Ron
Short, Edward


Foot, Michael (Ebbw vale)
Lever, L. M. (Ardwick)
Siater, Joseph (Sedgefield)




Small, William
Thompson, Dr. Alan (Dunfermline)
Wilson, Rt. Hon. Harold (Huyton)


Soskice, Rt. Hon. Sir Frank
Thornton, Ernest
Wyatt, Woodrow


Spriggs, Leslie
Watkins, Tudor



Stewart, Michael (Fulham)
Williams, W. R. (Openshaw)
TELLERS FOR THE NOES:


Stonehouse, John
Willis, E. G. (Edinburgh, E.)
Dr. Brougbton and Mr. Grey.

Schedule, as amended, agreed to.

Bill reported, with Amendments; as amended (in Committee and on recommittal), considered.

New Clause.—(TERMINATION OF POWERS UNDER GOVERNMENT ANNUITIES ACT, 1929.)

(1) Subject to subsection (2) below, no new annuities or insurances shall be granted under the Government Annuities Act, 1929, other than immediate life annuities of which the purchase is completed (within the meaning of the First Schedule to that Act) on or before the last day of August, nineteen hundred and sixty-two.

(2) Subsection (1) above shall not prevent the grant of an annuity under section forty-five of the Government Annuities Act, 1929, by way of commutation of a savings bank insurance, or the grant of an insurance or annuity under section forty-six of that Act on the surrender of a savings bank insurance or on default in the payment of premiums in respect of a savings bank insurance.

(3) For the purposes of sections forty-five and forty-six of the Government Annuities Act, 1929, and of any other enactment or instrument passed or made before this Act under which the amount of any payment is to be determined directly or indirectly by reference to the terms on which a savings bank annuity might for the time being be purchased under that Act, the tables in force under section fifty-three of that Act at the commencement of this Act shall, subject to subsection (4) below, apply as if this Act had not been passed.

(4) The Treasury may from time to time, if it appears to them that the tables in force for the purposes mentioned in subsection (3) above have ceased in any respect to be appropriate or sufficient, by order vary those tables or add or substitute new tables and any such order shall state the rules observed in making the variation or in framing new tables, and shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.—[Mr. Barber.]

Brought up, and read the First time.

Mr. Barber: I beg to move, That the Clause be read a Second time.
The Clause provides for the suspension of the sale of Government annuities. Sales of these annuities have declined fairly steadily over the last two decades. In the seven years 1954–60, an average of only 400 annuities per year were granted. En 1961, the figure had declined to 252 annuities. Just over a quarter of these annuities were issued through the

National Debt Office and the remainder through the savings banks, almost entirely the Post Office. There are now about 12,000 Government annuities in force, compared with over 1 million annuities issued by insurance companies. Government annuities, therefore, represent a negligible proportion of annuities now sold to the public.
The sale of annuities is a specialised task and the Government annuity service has suffered from the important drawback that all the specialised knowledge of these matters is concentrated in two offices, the National Debt Office and the Post Office Annuity Branch. It also has suffered in coin-petition with the insurance companies from the narrow range of types of Government annuity permitted by Statute compared with the wide range of annuities which are offered by the insurance companies.
We did not take this decision lightly, but the figures showed that there is no longer any significant public need for this service. Moreover, the alteration in the form of debt resulting from the sale of Government annuities is no longer of any significance in relation to the management of the National Debt. It seemed, therefore, to my right hon. and learned Friend that the logical course was to end this function. The Clause accordingly provides for the suspension of the power to issue new Government annuities and life insurances.
A saving is made in respect of the issue of an annuity in certain circumstances in relation to a savings bank insurance because the possibility of such an annuity was part of the terms of the contract for the insurance. Existing annuity and insurance contracts are in no way affected by this change. The Clause also makes consequential provisions for the annuity tables and references to those tables in other Acts and instruments. I commend the Clause to the House.

Mr. Mitchison: We require rather more explanation, even at this hour of the night, than the Economic Secretary


has given us. It is, no doubt, true that only a small and diminishing number of these annuities are being sold. The seller is the Government, wedded to private enterprise and hostile to any insurance by the State. These Government annuities have been going on for a considerable time and the 1929 Act, to which reference is made in the Clause, iteslf followed on legislation dating from many years before that.
The idea behind these annuities was not that every prospective annuitant should buy a Government annuity, but that in the annuity field they should fill the sort of rôle which has been filled by, say, the savings banks in the banking field. I see no inherent reason why that should not have been done. I notice that the Government profusely and extensively advertise Premium Bonds. Do they make any similar advertisements about Government annuities? I certainly have never seen anything calling the attention of the public at large to what can be expected by way of a Government annuity.
Next, we are told that the funds of these annuities are held, as indeed they are, by the National Debt Commissioners and the savings banks authorities. The Economic Secretary will remember very well that in the course of discussing the Trustee Investment Act a year or two ago, a question was raised about the powers of investment that these bodies have. If a life insurance company, with free and practically unrestricted powers of investment, as is the case in this country, is able to earn a rate of 6 per cent, or something of that sort on its life funds, it is no doubt able to make a better bargain, whether by way of annuity or by way of life insurance, with the individual applicant. The strength of its competition depends on its powers of investment and on the use that it makes of them. One of the most valuable employees of those companies is whoever attends to their investments, not to mention the directors who do the like.
12.45 a.m.
What is the position about the public authorities who have to deal with the funds out of which these annuities should be paid? They are allowed to invest only in Government securities.

The net result, to take another instance, is that the National Debt Commissioners have succeeded in losing about £300 million out of the reserve funds of national insurance, and they have lost that because they have had to lose it. They have had a short-term fund which has not lost so much and a long-term fund which has lost a very large amount by buying long-dated Government securities and seeing those securities suffer a fall. In that instance, what they have been doing it with has been the pounds of the employer and the pence of the employee.
It is a very great pity that an attempt to broaden those investment powers was resisted on that occasion. But those are the very investment powers that we are dealing with here. It is not surprising that the Government annuities and attempts at Government insurance and the like have been so severely handicapped.
So we have on the one hand, so far as I can see, a Government which, owing to the philosophy, or lack of philosophy, of the Tory Party, are opposed to any Government dealings of this kind and do nothing whatever to forward or advertise them, and on the other hand a system of public investment which dates back to the time when safety was to be found, or was thought to be found, only in Consols and which, consequently, handicaps hopelessly those who deal with insurance and annuities paid out of funds held by the National Debt Commissioners or the Post Office Savings Bank. I think that the National Debt Commissioners are by far the better instance because the Post Office Savings Bank seems to me to be purely a paper transaction. But I stand to be corrected on that. However, let us keep to the National Debt Commissioners for the moment.
What the Government should say is, "We have been thinking this over. We think there is a case for improving Government annuities. We think there is a case for popularising them. We think they meet a real need. We think that all the legislation dating back many decades cannot have been passed out of entire idiocy or lack of understanding of the needs of the people. We are prepared, therefore, to


consider what use can properly be made of the annuities and what we can do towards fulfilling the needs that these annuities were intended to meet."
There are many simple people in the country who find it difficult to choose between the sometimes bewildering claims of one life insurance and another and still have the old-fashioned belief that it is better to have Government security behind one. I am not saying for a moment that there is anything wrong with the security of the large life insurance companies. Obviously there is not. But there is a belief that there is some additional safety in the Post Office Savings Bank, Government annuities and that kind of thing. I should have thought that there was a real case for keeping these annuities and for taking steps to show a degree of enterprise about managing them.
The Treasury is not very good at being enterprising, but it has done a bit about Premium Bonds. If it can encourage Premium Bonds, a little spot of gambling in that way, it could do the like for the rather different need that the annuities are intended to meet—provision for people in later life, provision for people who are badly off in some way, provision for dependants and so on.
I should have thought that there was room for at any rate more than a mere explanation that we have been able to sell so few of the annuities that it is time we abandoned power to do so except where we have already promised to do it—for that is what the Government are saying. It is only when one comes to consider the character of the Conservative Party and the Government themselves that one sees the real reason for the Clause. After all, if one offered them the powers and invited them to exercise them, if one suggested that there was a public need to be met, is it really to be hoped or expected that a Government of the character of the present one would be fit or willing to compete with the private enterprise which they regard as their sacred cow in these matters?

Question put and agreed to.

Clause read a Second time and added to the Bill.

New Clause.—(RELIFF FOR BLIND PERSONS.)

(1) Subject to subsection (3) below, if a claimant proves—

(a) that he is a married man who for the year of assessment has his wife living with him, and that one of them was, and the other not, throughout the year a registered blind person; or
(b) that, not being such a married man, he was throughout the year a registered blind person;
and also proves that the amounts of any tax free disability payments receivable in the year by him or, as the case may be, by his wife living with him are such that seven-ninths of the aggregate thereof is less than one hundred pounds, he shall be entitled to a deduction from the amount of income tax with which he is chargeable equal to tax at the standard rate on an amount equal to one hundred pounds reduced by seven-ninths of the aggregate of any such payments so receivable.

(2) Subject to subsection (3) below, if a claimant proves—

(a) that he is a married man who for the year of assessment has his wife living with him; and
(b) that throughout the year both he and his wife were registered blind persons; and
(c) that the amounts of any tax-free disability payments receivable in the year (whether by him or his wife) are such that seven-ninths of the aggregate thereof is less than two hundred pounds;
he shall be entitled to a deduction from the amount of income tax with which he is chargeable equal to tax at the standard rate on an amount equal to two hundred pounds reduced by seven-ninths of the aggregate of any such payments so receivable.

(3) Unless a claimant who is entitled to relief for the year of assessment under section two hundred and seventeen of the Income Tax Act, 1952, in respect of the services of a daughter relinquishes his claim to that relief he shall not be allowed relief under subsection (1) or (2) above for that year.

(4) In this section—
registered blind person" means a person registered as a blind person in a register compiled under section twenty-nine of the National Assistance Act, 1948, or under any corresponding enactment for the time being in force in Northern Ireland;
taxfree disability payment" means a periodical payment receivable by a person on account of his blindness and not falling to be treated as income for the purposes of income tax.

(5) In subsection (1) of section fourteen of the Finance Act, 1957 (under which, as amended by the Finance Act, 1960, certain reliefs specified in paragraphs (a) to (d) thereof by reference to the enactments conferring them are allowable for purposes of surtax), at the


end of paragraph (d) there shall be inserted the following—
and
(e) subsection (1) or (2) of the section of the Finance Act, 1962 (relief for blind persons);".
(6) The Income Tax Acts, and in particular Part VIII of the Income Tax Act, 1952, shall have effect as if subsections (1) to (4) of this section were contained in the said Part VIII between sections two hundred and eighteen and two hundred and nineteen.—[Mr. Selwyn Lloyd.]

Brought up, and read the First time.

Mr. Brooke: I beg to move, That the Clause be read a Second time.

Mr. Speaker: May I say something about selection? I had thought that it would be for the convenience of the House if, with this new Clause, we were to take the new Clauses—"One hundred per cent. disabled", "One hundred per cent. disablement pensions: relief", "Relief for grave disability" and "Extension of relief under Finance Act, 1960, s.17", since which, to meet what I understand to be the wishes of the Opposition, I have agreed that I would select the new Clause—"One hundred per cent. disabled"—so that a Division could be taken upon it. I hope that that will not have the result of necessitating a second debate on the wide subject.

Mr. Callaghan: We can give that assurance, Sir. I take it that the Division on that new Clause will take place not now, but when it is reached in due time.

Mr. Speaker: Yes, I am obliged. I am sorry that I had to interrupt the right hon. Gentleman the Chief Secretary.

Mr. Brooke: My task is to explain the Government new Clause, although the debate could range wider than that.
It will be within the recollection of the House that in Committee, a month or more ago, we discussed a variety of proposals embodied in new Muses concerning tax relief for the disabled. I had to resist them on grounds to which I shall revert in a moment, but I promised in the course of my last speech on that occasion to tell my right hon. and learned Friend what had been said in the debate; to convey to him that views were strongly expressed on both sides

of the Committee, and that if a solution could be found, the Committee would welcome it. I carried out that undertaking and the new Clause is the result of my right hon. and learned Friend's consideration in the light of that debate.
Perhaps I may go back to the general difficulty with which any Chancellor of the Exchequer must be faced in connection with a claim for tax relief for the disabled, a claim which obviously elicits the strongest sympathies. As I said in Committee and as my right hon. and learned Friend would confirm, it is and continues to be his view that the right way to deal with this problem, this tragedy of disability, is not by tax relief but by direct social benefits. We have an extensive system of those benefits in this country now.
Secondly, the weakness in all the new Clauses which were offered to the Committee was that they did not take into account the two recommendations of the Radcliffe Commission which, while arguing for a tax relief for the disabled, stipulated that a disabled person should not be put in a position to take advantage simultaneously of tax relief under the Finance Acts and of benefits in respect of his disability which were paid to him tax-free. Furthermore, the Radcliffe Commission argued that any new tax reliefs for the disabled should take the place of the present daughter's services allowance of £40 which Lord Radcliffe and his colleagues agreed to be an anomaly in the tax laws. The new Clause takes account of those recommendations, and is thus distinguished from those that we were discussing in Committee.
A further difficulty about the main Radcliffe recommendation—which was the recommendation on which the Clauses submitted to us in Committee were avowedly founded—was how to determine who qualified. The hon. Member for Cardiff, South-East (Mr. Callaghan) fairly admitted that the administrative difficulties which I described on that occasion were real. He said that they should be overcome, but he did not seek to argue them out of existence.
There is not only the question whether one can have a general relief which is confined to those who are 100 per cent. disabled, without going further and


extending it to those who are 90 per cent. disabled, or 75 per cent, disabled as one of the new Clauses on the Notice Paper would do. There is also the problem of identifying just who would qualify for a general tax relief for the disabled. There is no difficulty with those who are in receipt of war disablement pension, or industrial injury benefit, but those are just the cases which, under the Radcliffe recommendations, would not be likely to qualify for tax relief because a tax allowance of, say, £100 would be likely to be substantially less than the tax free benefit which they receive for their war disability or for industrial injury.
Therefore, for any general relief far the disabled, one would have to inaugurate a system of specialist medical examinations of a great many people who would claim the new tax relief because of a disability not arising out of war, and not arising out of industrial injury. This would be a new field of medical examination. It would, of course, be needed in the case of all kinds of ailments, to use a general word, not arising from injury. There would be claims from people who suffered from a severe form of disease of one kind or another. One would have to set up standards of assessment, because I think it would be common acceptance that there would have to be either 100 per cent. disability, or a high percentage of disability, and at present we have no standards of assessment of that kind. If one is to take war pensions as a pattern for this, there would also have to be provision for appeals.
I do not want to swell up this administrative apparatus into anything more formidable than it would be, but it would be a considerable apparatus. This in itself may not be an overwhelming objection if the result would be good, but I submit to the House that at the end there would be a great deal of feeling of unfairness about where the line precisely fell. Inevitably, there would he many people who would sincerely believe that they were so disabled by some ailment or other that they should be entitled to get the tax relief if it was a general one for disablement, and yet they would find that they fell just on the wrong side of the line. The House must therefore appreciate that, however

well and skilfully we try to legislate for this matter and to administer the legislation, it is not likely that it will give the general satisfaction which is in the minds of all hon. Members on bath sides who have addressed themselves to the problem.
1.0 a.m.
These objections to the idea of a general tax relief for the disabled remain as valid as ever. There are the difficulties about settling how far one is to go—if one goes at all—beyond relief for 100 per cent. disablement; the difficulties of medical assessment; the essential fact that one ought not to enable people to have tax-free benefits from more sources than one—that is to say, from a Finance Act provision and from a social service—and, behind it all, what I believe to be the general conviction of all of us that the primary way to help those who are disabled is by social benefits and not by the more artificial method of tax relief.
Nevertheless, my right hon. and learned Friend did thoroughly consider what was said in Committee, and he was anxious to find some means of meeting the sense of the Committee. In doing that he found himself particularly lm-pressed by the arguments put forward by my hon. Friend the Member for Plymouth, Devonport (Miss Vickers), that the blind formed a special and, indeed, a unique category. It is difficult to think of any other disablement which one would more dread to suffer from oneself than blindness. Not only that; the blind are a clearly identifiable class, because, as my hon. Friend said, they are already registered as blind persons.
The fact that they can be identified by an objective test of that kind removes one of the difficutlies which I have mentioned. The Chancellor has therefore decided to put before the House this new Clause, which provides a tax-free allowance of £100 to a registered blind person if he or she is not receiving tax-free disability payments or augmentation allowances, or anything of that kind, of greater value than the tax-free allowances he proposes, and also on condition that the £40 daughter's allowance is not drawn at the same time. In those respects the new Clause corresponds closely with what the Radcliffe Commission recommended.
The House will appreciate that the people most likely to benefit from the provisions of the new Clause are blind persons who are seeking, despite their disability, to earn their living in the open market, so to speak—blind men and women who are earning their living as teachers, musicians and in other walks of life which, with great courage, they have managed to lay open for themselves.
It is true that a person of that kind may find that at present the State does nothing for him or her. Yet it taxes him or her like a sighted person although their taxable capacity must be in some degree lessened by their blindness. If a man has gone blind as a result of injury, whether in war or industrial occupation, he is not likely to get the benefit of this Clause because he will already have a greater tax-free benefit. If he is a successful claimant for National Assistance, he will obtain National Assistance at a special rate because he is blind. The category is recognised as such under National Assistance. Yet, if that blind man is doing his utmost to live as a normal member of society, moving about and going to his work, acting as a professional man—as a teacher or whatever it may be—it may well happen that in present circumstances he receives nothing from the State.
On all these grounds the Chancellor felt that it would be right, and he would like to propose to the House, that we should recognise the blind as a unique case. At this hour of the night I do not want to develop the matter further, but I hope that anyone who reads my speech will appreciate that this Clause will overcome or avoid the various difficulties to which I had earlier to invite the attention of the Committee. I hope that the House will accept this as a genuine endeavour by the Chancellor to meet the sense of the Committee and to do justice. I think, too, that it may be a further encouragement to blind persons to take the bold step of going out into the world and seeking to earn their living in the open market, recognising that if they are in that position Parliament will henceforth vote them a special tax allowance.

Miss Joan Vickers: I wish to thank the Chief Secretary, and through him, my right hon. and learned Friend, for this concession. It has been requested to the House ever since 1939 and I have been only one of the people interested in the matter, but it came to me to put forward the new Clause at a time when we were fortunate enough to have this concession made to many people, including the National Institute for the Blind. I appreciate what has been given to them tonight.
As the Chief Secretary said, the people we are thinking about are in a category which is not receiving any social benefit. I have led two deputations to the Treasury and I wish to express my thanks to the Economic Secretary to the Treasury for the way in which he received the last deputation and for the thought which has been put into a very complicated new Clause. It will benefit many people and will be an encouragement to others to go out and earn their living in an independent manner.
The reason we particularly wanted this benefit was the extra expense a blind person has to provide against. He has to obtain a guide, take more taxis than sighted people and give extra tips for the help given by strangers. Blind people do not want to feel that they are an obligation on anyone and, therefore, their life is a little more expensive than that of others. For this reason, I think that the new Clause will confer a benefit on many people and I express the thanks of the many who have been with me on deputations to the Chancellor for what he has given us tonight.

Mr. Houghton: We on this side of the House welcome, of course, the concession which the right hon. and learned Gentleman has been able to introduce by this new Clause. I regret that this debate comes on so late that we are not able to spend the time on it that it deserves, because the debates in Committee went much wider than this, and if the Chancellor was trying to get the feeling of the Committee he must have realised that although on both sides we were greatly concerned about blind persons as a unique section of disabled persons, our sympathy and our desire


for tax relief went beyond the blind. We had in mind, particularly, the gravely disabled, usually defined as 100 per cent. disabled.
As I listened to the Chief Secretary to the Treasury, so obviously impressed with the merits of the matter, I wondered why we had made such small impact on the mind of the Government in all the years we have been pressing this question in the past. The first proposal came after the publication of the Second Report of the Radcliffe Commission in April, 1954, and we have debated the blind and the gravely disabled on many occasions since, we on these benches swiftly took the matter up in the Finance Bill of 1954. We debated it in 1956, 1958, 1959, 1960 and 1961, and in all those years we failed to get any sympathetic response from the Government.
We are glad that at last, and apparently on the strong case put up by the hon. Lady the Member for Plymouth, Devonport (Miss Vickers), the scales have been tipped in favour of the Chancellor doing something this year. We are glad that he has done so, but I draw attention to the fact that the Royal Commission said much more on this question than tax relief for the blind. But before dwelling for a few moments on that, I want to point out one or two matters in relation to the proposal before the House. The relief is to give a tax allowance of £100. That is the figure mentioned in the Radcliffe Report of 1954. At the end of paragraph 203 the Commission says:
The figure of the allowance that we envisage, while not capable of any precise formulation, is a figure of not less than 100".
That was the figure mentioned by the Royal Commission when the personal allowance for a single person was £120 —and it is now £140; when the allowance for a dependent relative was £50, and it is now £75; when the allowance for a child under 11 was £85, and it is now £100. All personal allowances have gone up since 1954, and yet the Chancellor proposes to stick to the figure mentioned by the Royal Commission eight years ago—and they mentioned it as a minimum of not less than £100. A tax relief on £100 is rather low having regard to the changes which have taken place since the figure was mentioned in 1954.
1.15 a.m.
Secondly, although the Chancellor relieves the blind person from the difficult choice of whether he shall retain tax-free disablement payments or take the tax relief, he proposes to take into account in connection with this relief the amount of any tax-free disability payments received. I regret that the right hon. and learned Gentleman has felt it necessary to do that. For this small category of disabled persons I should have thought that the Chancellor could have been simple, generous and clear. However, that is not to be. The relief is not given to a blind person who is receiving tax-free disability payments seven-ninths of which exceed the amount of £100. If seven-ninths of his disability payments amount to less than £100, the seven-ninths are deducted from the £100 and tax relief is given on the difference. That is very complicated for blind persons to understand and goes unnecessarily into the refinements of the matter.
A further proviso is that a blind person who is claiming this relief must forgo the relief for a daughter looking after a disabled parent where that allowance is drawn. That is tax relief on £40. There are very few of them in payment at present. I know that the Royal Commission recommended that that relief should be withdrawn. I would not dissent from the Chancellor deciding that further allowances of that kind should not be given, but to require a blind person to forgo that relief to get the new one is unnecessarily cheese-paring in giving an allowance to this unique category of persons.
On these two counts one can reasonably criticise the practical proposals which the Chancellor makes. It is a commentary on the complexity of our tax system that it takes a whole page of the Notice Paper to give a simple relief to a small category of taxpayer. I thought that the Chancellor was making a drive for simplicity. I thought that he was anxious to make Income Tax understandable by the people. But he has got into the clutches of the Board of Inland Revenue on this and is in those clutches on almost everything he considers in relation to Income Tax. If he remains there he will make more complications and not simplify the tax system. A broader brush is necessary if we are to have simplification.
It is a pity that in giving this relief the Chancellor had to be niggardly in his approach to this disablement allowance. As the Chief Secretary pointed out, practically no blind person who is receiving a war disability pension or an industrial injuries pension can benefit under this proposal, though we welcome the fact that many for whom there is no disability payment will benefit from this relief. I am assuming all the time that sickness benefits and National Insurance benefits will be excluded from the definition of "tax-free disability payments." I assume that a tax-free disability payment is one which is specifically related to the disablement.
We also regret that the Chancellor has not seen fit to broaden the scope of this relief. It seemed to me, when I first read the proposals, that here was an opportunity for the Chancellor to go much further along the path of the Royal Commission that he has seen fit to go. Had he been dealing with the much larger category of gravely disabled persons he would have had more excuse for introducing the provisos in the allowance than he has when confining it to the comparatively small number of blind persons who will qualify.
The Chief Secretary has repeated many of the arguments used previously against giving relief for total disablement. In past years, Treasury Ministers have reiterated the same arguments against giving any relief, even to the blind, but we have at least got rid of that. The basis of the Royal Commission's recommendation is contained in paragraph 201 of the second Report:
… there are many kinds of disability (putting aside age, which is provided for by a special relief) so severe that they modify the whole conditions of a person's life and impose upon him a constant levy of extra expense that may fairly be said to affect the taxable capacity of his income.
The Commission examined the many claims for refinements in the catalogue of personal allowances. It said that it was impossible for a taxation system to provide special reliefs, or variable reliefs, for every category of human or domestic condition, but after having said that personal allowances generally must take account of the common experiences of men and women, and taxpayers, it came to the conclusion that there should

be an allowance for grave disablement. We find in paragraph 202:
Our general conclusion is that grave disability ought to be the subject of allowance.
The Commission made that recommendation in face of all that it had said against undue refinements in personal allowances generally. We must, therefore, give very great weight to the conclusion. The Commission, in paragraph 203, while it mentioned the blind incidentally, was talking all the time about persons who would be regarded as 100 per cent. disabled. The Minister says that if we talk of 100 per cent. disabled, we have to consider those who are 90 per cent., or 80 per cent., or 75 per cent. disabled, and so on.
The Commission dealt with the possibility in paragraph 203, in which, after referring to the obvious problems of administration, it stated:
The difficulty reinforces the need to begin cautiously and to confine qualification to 100 per cent. disablement. But we feel at the same time that the difficulty is not insuperable and ought to be faced. Machinery of the kind we have in mind does in fact exist, though created for the purpose of war pension administration; and some of the qualifications, e.g., blindness, do, as it were, prove themselves.
The Chancellor has not accepted that broader concept of the relief, and that is disappointing. We all know of persons who are gravely disabled. Some of them are not getting any disability payment of any kind. There are people suffering from some congenital condition, and there are those who have suffered accidents for which they have received no compensation. They, too, are living a very hard life. Many of them are bravely going out into the world to earn their living, grievously handicapped as many of them are.
I hope that the Chancellor will not think that this is a long moan about what he is proposing. We are really at the turning point in this matter. We have made so many fruitless efforts in the past and he is probably the first Chancellor to consider the matter favourably. This is a valuable innovation which, I hope, will pave the way to an extension of this sort of relief.
I do not for a moment deny that the Chief Secretary was right when he said that some problems of administration would arise if the allowance was extended to grave disability. We know


that those who have their disablement assessed by medical tribunals for war and industrial disability pensions would be identifiable from the records of the Ministry of Pensions and National Insurance. They would identify themselves almost as readily as blind persons who we recognise by the certification that they have.
In other cases of disablement arising out of neither war nor industrial injury, other difficulties of assessment would be presented and, undoubtedly, some reliance would have to be placed on a satisfactory system of medical certification. Obviously, inspectors of taxes are not doctors and it would not be any good for a person to present himself at his local taxation office saying, "I am 100 per cent. disabled." It would be necessary to have proper medical evidence.
I do not deny these things, nor did the Royal Commission. Despite this, the Commission stated that the difficulties should be faced. Grave disability should be the subject of an allowance and we regret that the Chancellor has not seen fit to go further than blind persons, deserving, of course, though they are. We regret also that in dealing with blind persons he has seen fit to stick rigidly to the refinements which are included in the proposed new Clause.
It would have been more wholesome for the Chancellor to have presented the Committee with a proposal that was simple and direct and which represented an additional benefit to all who could qualify for it notwithstanding any payments they were receiving for their disablement.

Question put and agreed to.

Clause read a Second time and added to the Bill.

New Clause.—(POWER TO DIRECT INTEREST ON NORTHERN IRELAND SECURITIES TO BE PAYABLE WITHOUT DEDUCTION OF TAX.)

(1) The Treasury on the application of the Ministry of Finance for Northern Ireland may, as respects any securities to which this section applies, direct that the securities specified in the direction shall be issued, or shall be deemed to have bean issued, subject to the condition that the interest thereon shall be paid without deduction of income tax; and in relation to any securities so specified and the interest thereon section one hundred and ninety-six of the Income Tax Act, 1952 (which made pro-

vision for paying interest on certain government securities without deduction of tax), shall have effect as if—

(a) the securities were securities in respect of which a direction had been given by the Treasury under subsection (1) of that section; and
(b) references in that section to "the Bank" were (notwithstanding subsection (6) thereof) references to the bank in the books of which the securities are registered or inscribed; and
(c) the references in subsections (3) and (4) of that section to the Treasury were references to the said Ministry of Finance.

(2) The securities to which this section applies are securities issued under paragraph (c) of subsection (1) of section eleven of the Exchequer and Financial Provisions Act (Northern Ireland), 1950, for money borrowed by the said Ministry of Finance for the purposes of making issues from the Consolidated Fund of Northern Ireland.—[Mr. Barber.]

Mr. Barber: I beg to move, That the Clause be read a Second time.
The purpose of the Clause is to permit, subject to the authority of the Treasury, interest on certain securities issued by the Government of Northern Ireland to be paid without deduction of Income Tax. The principle involved here will be familiar to hon. Members because, by virtue of Section 196 of our own Income Tax Act, 1952, the Treasury may direct that any of the various Government securities listed in that Section shall be issued, or shall be deemed to have been issued, subject to the condition that the interest shall be paid without the deduction of Income Tax.
I need not delay the Committee by going into this matter at great length, because the general principle involved has been discussed during the passage of almost every Finance Bill. However, the Section concerned has a restrictive application in that securities issued by the Government of Northern Ireland are not within its ambit.
1.30 a.m.
The Northern Ireland Government have now requested that the general enabling authority of Section 196 should apply to securities which are issued by them. I am sure that the House will agree that this is reasonable. The provision will operate in the same way as Section 196 now operates for United Kingdom securities, and a specific Treasury direction would be required in each case.

Mr. Callaghan: Why is the Clause being introduced now at this stage of the Bill? Secondly, is there any provision for checking on taxpayers that they are declaring the interest received without tax deduction from Northern Ireland?

Mr. Barber: The Clause is being introduced now because it has been requested by the Government of Northern Ireland. It seemed to my right hon. and learned Friend that the request was reasonable and that consequently we should accede to it. I am sure that the House would agree that it would be quite wrong for me to anticipate any action under the Clause by the Government of Northern Ireland. That must be a matter for them, although they could not take advantage of the Section without the consent of the Treasury.
As to the hon. Member's second point, I can only tell him that I think I am right in saying that so far as those securities which are issued by the United Kingdom Government are concerned, the Inland Revenue can obtain information about the amounts which are paid to holders of the securities without deduction of tax. I must be frank with the hon. Member. I do not know offhand, without making further inquiries, whether similar arrangements will be applied with regard to any securities issued by the Government of Northern Ireland. I will bear the point in mind and draw it to the attention of the Commissioners of Inland Revenue. This may well be a matter of machinery of which they will have to take note to ensure that they have the relevant information. But we have the safeguard that advantage of Section 196 cannot be taken without the consent of the Treasury.

Mr. Callaghan: Clearly, the great majority of taxpayers would declare their interest and pay tax on it, but there is obviously a loophole here for those who are evilly disposed if there are to be no reciprocal arrangements between the Ministry of Finance in Northern Ireland and the Commissioners of Inland Revenue, as in this country. I hope that the hon. Gentleman follows this up positively. May I ask whether this request was received after the Finance Bill was prepared? If it was not, it seems a little strange that we

should have reached this point between May and now when we have to tuck this provision into the Bill on Report.

Mr. Barber: My recollection is that the request has been made by the Government of Northern Ireland since the earlier proceedings in Committee. As to the hon. Member's first point, I am informed that the Commissioners of Inland Revenue can request information from the banks which make the payments.

Mr. George Lawson: Can the hon. Gentleman tell us why it is that if this matter is of such importance that it must be brought up now, at twenty-five minutes to two o'clock in the morning, there are no hon. Members from Northern Ireland present to put the case for their part of the country?

Hon. Members: Hon. Members: There are.

Question put, and agreed to.

Clause read a Second time and added to the Bill.

Mr. Selwyn Lloyd: For reasons which I shall not specify, I beg to move,
That further consideration of the Bill, as amended, be now adjourned.

Mr. Callaghan: I draw attention to the fact that we have had 25 separate debates today, 20 of them being on Government Amendments or new Clauses, only five at the most being on Amendments or new Clauses introduced by the Opposition or hon. Members opposite. It so happened that they all came from the Opposition. I think that the Government have pressed us too hard and too far today. This is something which the House should note and the Government should watch carefully. Having got to this stage of the Bill, they have set aside two days of which they have themselves taken almost one whole day. Since 7.20 p.m., we have done nothing but discuss Government Amendments and new Clauses.
Some of those Amendments and new Clauses have been introduced because of the way the Bill was drafted in the first place. Some of them are the result of new matter being introduced on Report. This is why I asked the Economic Secretary the question about Northern Ireland. We have had a new Clause


relating to the taxation of the gas industry. So far as I know, there was no reason to introduce it on Report. It could have been, and should have been, put into the Finance Bill. There was the new Clause about Government annuities. Why it had to be tucked in at this stage I do not know.
I do not wish to be unduly critical, but I do not see why we should have brought into the Finance Bill at this very late stage matters which are not included at the time it is printed.

Mr. Mitchison: And which require a special Ways and Means Resolution.

Mr. Callaghan: One of which, the one relating to the Gas Council, called for a special Ways and Means Resolution, as my hon. and learned Friend says. These matters should have been in the Bill earlier. I can understand the Government wanting to cram as much as they can, but the House is entitled to say that, if they set aside two days for Re-committal and Report, they should not take the time up with their own new Clauses which the House has not seen earlier. Yet this is what they have to some extent done today.
Naturally, I agree with the Motion, but it seems to me that we shall have to go very late again tomorrow. I can see us going on for most of the night, because we shall tomorrow reach Amendments put down by back benchers on bath sides, the Government having taken practically all of one of the two days. I register this complaint not just on behalf of the Opposition but, I believe, on behalf of back benchers everywhere and because, as a result of the way in which the matter has been handled, we are likely to be forced to sit very late on two nights.

Question put and agreed to.

Bill, as amended (in Committee and on recommittal), to be further considered this day.

Orders of the Day — MRS. FERGUSON WILLS (FIREARMS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. McLaren.]

1.38 a.m.

Mr. John E. Maginnis: I intend in this debate to raise a matter of principle and one which, in my view, touches the honour of Her Majesty's Government. Happily, the facts in the case are not in dispute. The issue is narrow, but it is of vital importance to the person concerned.
Mrs. Ferguson Wills is the widow of Lieutenant-Colonel S. K. Wills, who died in 1937. At the time of the troubles in Ireland, the United Kingdom Government ordered individuals to hand their firearms to the Royal Irish Constabulary for safe keeping. Lieutenant-Colonel Wills did so, and received a receipt which I have here. It is headed "O.H.M.S." and is in the following terms:
Firearms property of Lieut.-Colonel Samuel K. Wills, Royal Army Medical Corps (Retired). Handed over for safe custody (by order) to Royal Irish Constabulary, Bally-hack-amore, Belfast, Co. Down. personally by the owner on January 20th, 1920, the following:
No. 1 One Boer Mauser Rifle. No. on rifle B 1837 and letters J.C.V. cut on stock.
No. 2. One Rook rifle. No. on rifle 287–230 0.P also on barrel No. 983.
The above in fine serviceable condition, oiled and lubricated, enveloped in flannel and secured in strong wooden box with owner's name printed thereon and carefully screwed down. Received the above from Lieut.-Colonel S. K. Wills, R.A.M.C., of 41, Knock Road. Knock, Belfast.
"Bridgham, Sergeant in charge. Dated at Ballyhackamore, January 20th, 1920."
I understand from Mrs. Ferguson Wills that a pair of horse pistols were also included with these arms in a wooden case, but the former were not entered on the receipt which was given.
The only parts of the receipt which I cannot read are the initials of the sergeant in charge, but this is immaterial since my hon. and learned Friend the Under-Secretary of State does not dispute the accuracy or genuineness of the receipt. Neither does he deny that the United Kingdom Government accept full responsibility for the receipt given by


this officer of the Royal Irish Constabulary, even though, as the House knows, this force was disbanded on 31st August, 1922.
What happened to firearms handed in for safe keeping during this period? There were first stored in the military depot at Carrickfergus, later at Woolwich Arsenal and also in Dublin. I understand that later they were collected together at Woolwich Arsenal, and that in 1923 the United Kingdom Government started to return some of these firearms to their owners. In 1927, those arms which remainded were transferred to the Governments of Northern Ireland and the Republic of Eire, although some had been destroyed.
During that period—in fact, from 1922 to 1923 —Mrs. Ferguson Wills and her husband were living abroad and never received any communication about their firearms, nor did they see any notice in the Press intimating that such arms would be returned. There must have been a quantity of arms which were not returned to their owners and been either lost or damaged, for between May, 1923, and April, 1929. a sum of nearly £14,000 was paid in compensation to owners by the United Kingdom Government. Again, neither Mrs. Ferguson Wills nor her husband knew that these payments were being made in compensation, and I understand that the Home Office cannot trace any communication having been sent to them to tell them of such payments.
After her husband's death, states Mrs. Ferguson Wills,
As there always seemed to be some trouble in the country I did nothing, thinking the firearms were in safe keeping.
Perhaps she showed too great a confidence in the integrity of Her Majesty's Government, for when she presented the receipt for these arms which they had ordered in for safe keening, the arms were gone and compensation was refused.
I ask my hon. and learned Friend to consider the matter afresh. Her Majesty's Government ordered these arms in for safe keeping and got them. That is not in dispute. They gave a receipt and intended to honour it by returning the arms or paying compensation. That is not in dispute, for they have taken both these courses with other

individuals. In fact, they have already paid nearly £14,000 in compensation. The question is, why will they not pay compensation to Mrs. Ferguson Wills? Is it because of the length of time which has passed? I remind my hon. and learned Friend that this time elapsed because Mrs. Ferguson Wills relied upon the receipt which she held and believed that the arms were in safe keeping. The House is, I am sure, aware that last year a payment of about £100 was made from the Titanic Fund for property lost in that disaster, which occurred in 1912. Perhaps a fund of this nature can give a lead to Her Majesty's Government.
I understand that no request for compensation other than that from Mrs. Ferguson Wills had been received in recent years, and in consequence there can be no question of payment in this case opening the door to a flood of other claims. If, however, there were other valid claims, they should be met.
Does my hon. and learned Friend believe that in similar circumstances a bank, having given a receipt, would repudiate it without paying compensation? Is a public company, therefore, more jealous of its honour than Her Majesty's Government? If my hon. and learned Friend had taken property and failed to return it to its owner, would he even dream of dishonouring a receipt because time had lapsed? I do not think so.
As I said, the facts are not in dispute. The issue is one of principle and, I believe, touches the honour of Her Majestys Government. I ask my hon. and learned Friend to reconsider the matter and agree to pay compensation to Mrs. Ferguson Wills.

1.45 a.m.

The Joint Under-Secretary of State for the Home Department (Mr. Charles Fletcher-Cooke): My hon. Friend the Member for Armagh (Mr. Maginnis) has made an eloquent plea on behalf of Mrs. Ferguson Wills, and has stated his view of the principle involved. I agree entirely that this is an issue of principle. If compensation were to be paid, its amount would be very small.
My hon. Friend explained that this matter was first raised in January, 1960, by my hon. Friend the Member for Antrim, South (Mr. Knox Cunningham),


whose constituent Mrs. Wills is, with my right hon. Friend who is now Secretary of the Department of Technical Cooperation. The ensuing correspondence lasted for most of 1960, but it was not possible to reach agreement. Subsequently my hon. Friend the Member for Belfast, South (Sir D. Campbell) asked my right hon. Friend the Home Secretary a number of Parliamentary Questions about the matter. There were 10 in all, answered during the early months of 1961.
Naturally, I regret that the points of view of the Government and of my hon. Friends from Northern Ireland who have interested themselves in this matter should remain as far apart as ever. I should say straight away that there is nothing I can add to the full explanations which they have already been given in the answers to those Questions and otherwise of the Government's views. I think that it is fair to say that the arguments advanced by my hon. Friend the Member for Armagh are essentially the same as those which have been advanced in opposition to the Government's views in the correspondence and Questions I have mentioned.
No Government like to appear unsympathetic or to seem to act harshly towards a trusting individual. But I am fully satisfied that the Government have acted perfectly fairly towards Mrs. Wills. I must say quite frankly that I do not see how it can reasonably be suggested that any responsible Government could have acted differently. The arguments adduced in favour of compensating Mrs. Wills have implications for public policy that are unacceptable, and that have in fact been rejected on more than one occasion by Parliament.
My hon. Friend has already given a short account of the history of this matter, but I must recapitulate and add to his account. During the troubles in Ireland owners of firearms were at first invited, and later ordered, to hand in their arms to the authorities for safe keeping. The number of arms surrendered ran into tens of thousands. Some of these arms were subsequently sent to Woolwich Arsenal; many of them remained in Ireland.
From mid-1923 onwards steps were taken by the United Kingdom Government to return surrendered arms to their

owners, first by advertisement in the Press and then by sending individual notifications to all owners whose names and addresses were known, inviting them to reclaim their arms. Compensation was paid to owners whose arms had been damaged or could not be returned because they had been lost. Remaining records indicate that compensation amounting to nearly £14,000 was paid from the United Kingdom Exchequer the last payment was in 1929.
In 1927, the remaining arms at Woolwich were sent back to Northern Ireland or to the Irish Republic, according to where they had been handed in, and the Governments of those territories took over responsibility for assessing and paying compensation. Arms regarded as worthless and unserviceable—valued at under £2—were not returned to Northern Ireland but were destroyed.
Mrs. Wills has produced a receipt which shows that on 20th January, 1920, her late husband, who was then living in Belfast, handed over at a local Royal Irish Constabulary station, by order, a Boer Mauser rifle and a rook rifle. Both guns were described as being in fair serviceable condition; they were secured in a strong wooden box with Colonel Wills' name on it. Mrs. Wills has said that there was also a pair of horse pistols in the box, but there is no record of this.
Thorough searches for these arms have been made both here and in Northern Ireland, but without success. There are now no records of particular surrendered arms. The individual records have all been destroyed, in accordance with the rules relating to public records of this class. Consequently, it is now impossible to say whether the arms in question ever left Northern Ireland, or, if so, whether they were sent back or were destroyed, or whether a letter inviting Colonel Wills to claim the arms was sent to him or, if so, to what address.
The Government cannot accept the contention that, having once accepted the compulsory surrender of these arms, they are under a permanent obligation either to return them or to pay compensation. An obligation of this nature cannot endure forever. This Parliament has in more than one enactment recognised the need for limitation. It is true


that Colonel and Mrs. Wills were abroad from 1922 to 1928, during the period when the Government were making attempts to return all surrendered arms to their owners. But the fact seems to be that at no time between 1920 and 1959 did either of them evince any interest whatever in these arms, or make any inquiry about them. It was not that they had forgotten. It appears that Mrs. Wills was aware for twenty or more years, before her inquiry at the end of 1959, that the arms had been surrendered, but throughout this period she did nothing about it.
I may say that Colonel Wills was not the only owner who made no effort to claim his arms; there were about 2,000 others. It has been argued that the Government are in the same position as the private person who accepts custody of someone else's property. I would not like to dig deep into the law relating to bailees of this sort, but, even so, I cannot accept this comparison. The Government act on behalf of the public as a whole and in the public interest. The action taken in 1920 was essential at a time of emergency, and I do not think that anyone seeks to deny this. Yet it is argued that the Government, having been forced to take this action in the discharge of their essential responsibilities, must forever remain liable to the owners of the surrendered property, that it maks no difference whether the owner waits four years, or, as in this case, forty years, before making a claim.
The owner is not even expected, apparently, to tell the Government of his whereabouts. He, or his successor,

on this argument, can wait until it suits them to turn up and claim, and the Government then have no option but to produce or, failing this, to pay compensation. This argument involves putting an intolerable burden on the public purse. If it were accepted and carried to its logical conclusion, which would mean repealing all the limitation enactments of course, the Government would see no end, to the crack of doom, to their ultimate liabilities. It is the taxpayer who would suffer in the long run.
We are satisfied that the proper principle in this matter is that embodied in the Limitation Acts. In the case of public authorities, it is right and proper and well known that claims should be made within a reasonable period of years and should then otherwise lapse. This preserves the proper balance, giving, on the one hand, reasonable protection for the rights of the individual, and, on the other, reasonable protection for the public interest and, in particular, for the taxpayer.
I am, of course, sorry that Mrs. Wills now finds herself unable to recover her husbands property or its value, but the fault at this great distance of time is not that of Her Majesty's Government, and I must say quite clearly, and, I hope, finally, that I can see no justification for the suggestion that the taxpayer, after all this lapse of time, should be expected to provide compensation.

Question put and agreed to.

Adjourned accordingly at five minutes to Two o'clock.